Market News

Monthly Economic Update: September 2019

Economy: Concerns Growing On Outlook For Global Growth

Another month of purchasing managers surveys from around the globe appears to confirm that the deterioration in manufacturing activity continues, with the U.S. being the latest to hit contraction territory.

Both the Institute for Supply Management (ISM) and the IHS Markit reports released in early September on purchasing managers activity pointed to a slowdown or contraction in August. The ISM report showed that the nation’s manufacturing sector shrank for the first time in three years.

The ISM’s purchasing managers index (PMI) for manufacturing fell to 49.1 in August from the previous month’s reading of 51.2. August’s reading was the lowest since January 2016 and the first time the index fell below 50.0 (readings below 50.0 indicate activity is contracting) since August 2016.1

Apart from the ISM’s main purchasing managers index, all of the 10 sub-categories tracked by ISM were either contracting, slowing or decreasing. Notable among these index series were: new orders, which fell 3.6 points to 47.2; employment, which declined by 4.3 points to 47.4; and new export orders, declining by 4.8 points to 43.3.

ISM’s key gauge of manufacturing activity has been declining over the past four months and comes amid signs of contraction in other key global economies, including Germany, Japan and South Korea, as well as the United Kingdom. Trade and weaker global economic growth appear to have now washed up on the shores of the U.S.


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This month, another round of tariffs went into effect with the U.S. adding 15% tariffs on Chinese goods that include clothing, tools and electronics. Chinese tariffs on U.S. soybeans, crude oil and pharmaceuticals have also gone into effect.

The current downturn in global manufacturing has now extended into its fourth month, according to the J.P. Morgan Global Manufacturing PMI, which is produced by J.P. Morgan and IHS Markit in association with ISM and the International Federation of Purchasing and Supply Management. 2

Real Estate: Home-Price Growth Continues to Slow; Mortgage Rates Follow Bonds Lower

Weaker manufacturing data and compression in bond yields pushed 30-year fixed-rate mortgages to their lowest levels in three years. Home price appreciation is also slowing at a pace the market hasn’t experienced since prices were falling in the wake of the 2008 housing crash. Lower rates are helping lift sales, yet price deceleration hasn’t fully trickled through for buyers looking for more affordable homes.

Figures released in August show that the pace of home price growth as tracked by the S&P CoreLogic Case-Shiller National Home Price Index continues to decline. Annual prices nationally rose 3.1% in June compared to the previous year, down from 3.3% the previous month. The top 20 metropolitan areas posted a 2.1% year-over-year gain, down from 2.4% the previous month.3

The Federal Housing Finance Agency House Price Index, which tracks prices for single-family homes in all 50 states going back to the mid-1970s, released figures in August showing that home prices rose by 4.99% in the second quarter.4

In early September, Freddie Mac reported that the 30-year fixed-rate mortgage averaged 3.49% for the week ending September 5, down from 4.54% a year ago. The average was the lowest since October 2016. “While economic growth is clearly slowing due to rising manufacturing and trade headwinds, economic fundamentals are still solid for U.S. consumers. The unemployment rate is low, housing affordability is improving, homebuyer demand is rising, and home price growth is stable,” Sam Khater, Freddie Mac’s chief economist, said in a release.5



According to the National Association of Realtors (NAR), falling mortgage rates are improving affordability and “nudging” buyers into the market. That helped lead to a rebound in existing-home sales, which rose in July by 2.5% from June to a seasonally adjusted annual rate of 5.42 million. Sales were up marginally by 0.6% from a year ago.6

Stocks: Energy, Financial Sectors Falter; Trade War Impacts Global Markets

It was a volatile month for U.S. stocks, but the major indexes managed to close out August paring their losses in the final trading days. The dominant themes for the market were the escalation in the U.S.-China trade war and the significant decline in sovereign bond yields, flashing recession warning signs for investors.

The U.S. Treasury 10-year note ended the month with a yield of 1.499%, down from 1.89% at the end of July. The 30-year Treasury bond’s yield fell below 2.00% during August for the first time in its history, hitting an all-time low of 1.905% during the final week of the month.

For August, the S&P 500 fell 1.81%, while the Dow Jones Industrial Average (DJIA) declined by 1.72%. The Nasdaq Composite fell 2.60%, as technology stocks’ leadership position was undercut by trade and global growth woes. With the weakening performance during August, the major U.S. stock indexes have still posted double-digit increases this year. However, the S&P 500 and DJIA have barely gained ground when tracked back to August 2018, while the Nasdaq has fallen by 1.81% during that time period.



For August, only three of the 11 sectors within the S&P 500 posted gains for the month – those being utilities (up 4.66%), real estate (up 4.61%) and consumer staples (up 1.64%). The information technology (IT) sector still leads all 11 sectors this year through August (up 28.02%), followed by real estate (up 26.03%).

Twelve-month returns, however, show that defensive sectors (particularly income-related sectors like utilities and real estate) have fared the best, followed by consumer staples. Market leaders like IT have only gained 4.98% in the year through August, while the utilities sector is up by 17.16%, real estate has gained 16.30%, and consumer staples have risen by 12.66%.

On the flip side, energy, materials and industrials were among the worst performing sectors within the S&P 500, as were financial stocks. The energy sector tumbled 8.73% in August as domestic oil prices fell by nearly 6.0%. The materials and industrial sectors were hit by tariff-related and economic slowdown woes, losing 3.08% and 2.95% month-to-month, respectively. The energy sector is alone among the industry sectors in the S&P 500 with negative year-to-date performance. It is down by 0.47% through August and has lost 22.92% over the past 12 months.

As of August 30, with most companies within the S&P 500 reporting earnings for the second quarter, the blended earnings decline for the three-month period through June was 0.4%. That was well below the five-year average growth rate of 7.3% and the first decline in earnings for consecutive quarters since 2016. Revenues rose 4.0%, above the 3.5% five-year average growth rate, but at the lowest pace of growth since the third quarter of 2016, according to FactSet.

For the third quarter, analysts are projecting a 3.5% decline in earnings and revenue growth of 3.1% for the companies in the S&P 500 compared to a year ago. Earnings are projected to rebound in the fourth quarter, with a gain of 3.5%, while revenues are projected to grow by 4.0% on a year-over-year basis, according to FactSet.7

With investors seeking safety and liquidity this past month, small-cap and mid-cap stocks widely underperformed their larger counterparts. The S&P MidCap 400 fell 4.35% and the S&P SmallCap 600 declined by 4.64%. Both indexes were dragged down by losses in the energy sector. The Russell 2000 fell 5.07% in August. While gaining nearly 11.0% this year, the broad index of small-cap stocks has fallen by 14.13% since the end of August 2018.

Returns for stocks abroad for the month were mostly negative. The S&P Global Broad Market Index (BMI) fell 2.68%, and without contributions from the U.S., the Global Ex-U.S. Index fell 3.22%. In Asia, economies partly tied to the fortunes of the Chinese economy and U.S. supply chains have been experiencing fallout from the trade war. In Korea, pressure on a growing number of export-focused companies, weaker domestic growth and a deepening trade dispute with Japan have been weighing on local stocks. The Kospi Composite Index declined 2.80% in August and has fallen by more than 15.0% in the past year.

In Japan, private consumption and capital investment helped lift the economy to a greater-than-expected 1.8% annualized increase in the quarterly period from April through June, despite negative external demand with slowing overseas economies.8 The Nikkei 225 fell 3.80% during the month, but is still up 3.45% for the year through August.

Overall, emerging markets, as tracked by the S&P Emerging BMI, were down 4.77% in August, yet have remained positive as a group for the year with price gains of 3.90%. A stronger dollar, safe-haven buying of government bonds and precious metals, as well as recessionary fears, weighed on emerging market equities in the past month.



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  1. Institute for Supply Management. (2019, September 3). August 2019 Manufacturing ISM® Report On Business® [Press Release]. Retrieved from:
  2. IHS Markit. (2019, September 3). J.P. Morgan Global Manufacturing PMI™ [Press Release]. Retrieved from:
  3. S&P Dow Jones Indices (2019, August 27). Phoenix Replaces Las Vegas As Top City In Annual Gains According To S&P CoreLogic Case-Shiller Index [Press Release]. Retrieved from:
  4. Federal Housing Finance Agency (2019, August 27). U.S. House Prices Rise 1.0 Percent in Second Quarter; Up 5.0 Percent from Last Year [Press Release]. Retrieved from:
  5. Freddie Mac. (2019, September 5). Mortgage Rates Drop [Press Release]. Retrieved from:
  6. National Association of Realtors. (2019, August 21). Existing-Home Sales Climb 2.5% in July [Press Release]. Retrieved from:
  7. Butters, J. (2019, August 30). Earnings Insight. FactSet Research Systems Inc. Retrieved from:
  8. Fujikawa, M. (2019, August 9). Japan Q2 GDP climbs stronger-than-forecast 1.8%. MarketWatch. Retrieved from:

Sources for Market Data:

Dow Jones Industrial Average:                                                                                                                                                                                         

S&P 500:                                                                                                                                                                                                

Nasdaq Composite:                                                                                                                                                          

Russell 2000:                                                                                                                                 

10-Year Tips:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

S&P 500 Sectors, S&P MidCap 400, S&P SmallCap 600, S&P Global BMIs:

Silverblatt, H. (2019, September 3). Market Attributes: U.S. Equities August 2019. S&P Dow Jones Indices Market Attributes®. Retrieved from:

10-Year Treasury Note:

Kospi Composite:                                                                                                     

Nikkei 225:


Investment advisory services are offered through BCJ Capital Management, LLC., an SEC Registered Investment Adviser. Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed, and past performance is no guarantee of future results. For specific tax advice on any strategy, consult with a qualified tax professional before implementing any strategy discussed herein. BCJ FG 19-136

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