INSIGHTS FROM FIRST FOUNDATION

A First Foundation Blog

The Week Ahead – FINI!

Welcome to “The Week Ahead” where we take a moment to provide our thoughts on what we can expect in markets and the economy during the upcoming week.

Fini, French for finished. Also, my own new saying for the current environment for bonds. Fixed Income, No Income. A few weeks ago the entire German Bund yield curve turned negative and investors are currently paying Germany for the privilege of holding their hard earned cash. As of August 9th, 27% of all bonds in the world are now trading with negative interest rates. Traditionally we’ve always used the terms “bonds and fixed income” interchangeably, but with fixed income now meaning zero income, should we still call negative yielding bonds fixed income anymore? The total negative yielding bond market currently? $15 trillion. An even more astounding stat? $1 trillion of corporate debt globally is now trading in negative yield territory. Giving to a country to safe keep your cash is one thing. Maybe giving it to a strong balance sheet municipality or state might make sense. But a company? Global investors looking for positive yield have further dived into U.S. treasuries, pushing the 10-year U.S. treasury from 1.90% at start the month to the current rate of 1.52%. With global growth looking weak and trade tensions worsening, it looks like interest rates will be anchored lower for the time being.

We will take another look at U.S GDP for the second quarter of this year as the second estimate will be released. The initial reading of +2.1% surprised investors as many had baked in much lower growth due to the government shutdown at the start of the year and trade war tensions. A reaffirmation of higher than +2% growth could alleviate recession fears. Over the last fifty years the average GDP growth for the U.S. economy was 2.7%. In this current expansion, which followed the Great Financial Recession, GDP growth has averaged +2.3%.

Data deck for August 24–August 30:

Date

Indicator

Period

August 26

Durable Goods Orders

July

August 27

Consumer Confidence

August

August 27

Case-Shiller Home Price Index

June

August 29

Pending Home Sales

July

August 29

Initial Jobless Claims

----

August 29

Advance Goods Trade Balance

July

August 29

U.S. GDP Update

2Q2019

August 29

Core PCE Update

2Q2019

August 30

Chicago PMI

August

August 30

University of Michigan Consumer Sentiment

August

August 30

Personal Spending

July

 

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Andrew Chan, CAIA, Portfolio Strategist
About the Author
Andrew Chan, CAIA, Portfolio Strategist
Mr. Chan serves on the investment team and is responsible for conducting investment manager research and portfolio construction. As a member of the investment committee, he provides market commentary and investment insights. Mr. Chan’s responsibilities include overseeing client portfolios, calculating risk metrics, conducting the rebalancing of client portfolios, and evaluating the selection of new investment managers. With over 10 years of wealth management experience, Mr. Chan has played key roles across various aspects of investment and wealth management. Prior to joining First Foundation Advisors, Mr. Chan was most recently a portfolio manager at U.S. Trust where, in addition to his daily responsibilities, he served on numerous internal committees including the investment manager committee, the portfolio model committee, and the strategic technology committee. He also served on the in-house strategic consultant committee reporting directly to the President of U.S. Trust. Mr. Chan is a graduate of the Wharton School Executive Program on Investment Management and holds a Bachelor of Arts degree in Business Administration from the University of California, Riverside. He is a Chartered Alternative Investment Analyst (CAIA). Mr. Chan serves on the executive board for CAIA Los Angeles and is the Interim President for the association. Read more