HI_HorizonNotesheader_7152019

Markets Rise Following Testimony from Fed Chairman Powell

BIG NUMBER
-0.34%
(Click the chart below to view and download)

sidebar - RAWHAT IT IS
The year-to-date decline in the 10-year global real interest rate.*

*Equal weight in the US, Europe, and Japan. Bloomberg data calculated as nominal yield less breakeven inflation rate.

MARKET/POLICY NOTES
Central banks around the world continue to provide monetary stimulus through easier financing conditions. Because real interest rates are adjusted for expected inflation, the “real” cost of borrowing in global bond markets is negative, which is supportive for economic growth and markets.

HOW MARKETS REACTED
U.S. equity markets continued to rally following Federal Reserve Chairman Powell’s testimony to Congress, with the Dow Jones Industrial Average topping 27,000 for the first time. The Standard & Poor’s 500 closed the week above 3,000, another first. Yields on 10-year Treasuries rose, closing the week at 2.12%.

WHAT THIS MEANS
Global central banks appear to be moving back into synch as both the European Central Bank and the U.S. Federal Reserve indicate plans to keep rates low. Sunday night’s GDP numbers showed the Chinese economy at its slowest rate of growth since 1992, suggesting additional stimulus may be coming there as well.

WHAT TO WATCH
Earnings season kicks off this week with the major banks reporting. U.S. retail sales are due out on Tuesday, an important number to watch as the economy has been largely driven by consumer spending, supported by a strong job market.

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