Market Perspective for August 6, 2019

Equities opened the week lower after China let the yuan slip against the U.S. dollar. The central bank had called that a red line in the past but eased away from that in recent months as economic pressure weighed. Although many analysts predicted the dollar would climb past 7 yuan by yearend, China used the recent escalation in the trade dispute as cover for the depreciation. iShares China Large Cap (FXI) and iShares MSCI Hong Kong (EWH) declined 3.91 percent and 4.90 percent on the day.

The Dow Jones Industrial Average was the best performing index, though it still slid 2.90 percent. Technology was the worst performing sector. SPDR Technology (XLK) fell 4.77 percent. Utilities and real estate outperformed as defensive havens, as did SPDR Consumer Staples (XLP) and Consumer Discretionary (XLY). Those funds dipped only 2.60 percent and 2. 68 percent, respectively.

iShares Edge MSCI Minimum Volatility (USMV) extended its outperformance with a decrease of 2.36 percent. The fund has consistently widened its lead over the broader market during periods of volatility without giving back the entirety of that lead when stocks resume their march higher. Vanguard Dividend Appreciation (VIG) also held up well. It slipped 2.74 percent.

The July services PMIs came in stronger than expected, indicating U.S. economic growth is on solid footing. The Job openings and Labor Turnover Survey (JOLTS) will be released on Tuesday and produce price inflation is out on Friday.

The U.S. Dollar Index weakened 0.30 percent on Monday as traders opted to buy the euro. Given Europe’s weaker economy and likely expansion of quantitative easing, we suspect the weakness will not continue for long. The stronger euro did help iShares MSCI EAFE (EFA) outperform on Monday though. It increased 2.50 percent. iShares MSCI Emerging Markets (EEM) fell 3.70 percent.

Earnings season is still in full swing. Firms reporting this week include Disney (DIS), Allergan ( AGN), Wynn Resorts (WYNN), Pioneer Natural Resources (PDX), Booking Holdings (BKNG), Roku (ROKU), CVS Health (CVS), Skyworks (SWKS), Mercadolibre (MELI), Marathon Oil ( MRO), Activision Blizzard (ATVI), Uber (UBER), Trade Desk (TTD), Viacom (VIAB), WABCO Holdings (WBC), Novo Nordisk (NVO) and Liberty Broadband (LBRDK).

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