Markets are Preoccupied
The U.S. stock market dropped on Thursday and continued to fall on Friday, as investors overlooked a new job report and stressed out on earlier threats by President Trump to extend tariffs to all Chinese imports. The escalation in trade tensions sent major stock indexes around the world down and saw one of the worst one-day drop in oil prices since 2015. Investors have been flocking to assets viewed as relatively safe, such as government bonds, the U.S. dollar, and gold.
The yield on the 10-year U.S. Treasury note fell to 1.881% on Thursday, its lowest yield since the 2016 presidential election. Friday had one of the most volatile days in months for U.S. stocks and bonds, triggered by a surprise pronouncement by President Trump that effective September 1 the U.S. will place new tariffs on $300 billion in Chinese goods, including smartphones, clothes, toys, and other consumer products.
Bond Funds are Cashing In
Investors are piling into safe-haven bonds at a record pace, a sign that caution remains despite the upward-sloping stock market. Mutual funds and exchange-traded funds tracking bonds posted $12.1 billion of inflows for the week ended July 17, the 28th consecutive week of inflows. That brings the total so far this year to $254 billion, on pace for a record $455 billion on an annualized basis in 2019. That compares with $1.7 trillion in bond inflows over the past 10 years.
Steady Jobs Growth
Steady U.S. hiring growth continued into the second half of 2019, providing a solid foundation for the decadelong economic expansion at a time of global uncertainty.
According to the Labor Department, nonfarm payrolls rose by 164,000 in July. The unemployment rate last month held steady at 3.7%, near a 50-year low. Average hourly wages for private-sector workers advanced 3.2% from a year earlier, up slightly from the previous month’s pace but down slightly from February peak of 3.4%.
A healthy overall job market provides a meaningful counterweight to slow global growth and trade tensions that prompted the Federal Reserve to cut interest rates Wednesday.