Last week markets retreated. Data was strong in some regards, but adjusted projections brought about a self-fulfilling prophecy. 

Bond Buying 

First, the European Central Bank (ECB) introduced a new bond buying program, Targeted Longer-Term Refinancing Operation (TLTRO III). This represents an opportunity for lending rates to remain low for a prolonged period of time in Europe. The benefit would be to encourage borrowing and stimulate the economy.  Clearly, the draw back is the admission that the economy needs stimulating. 

EU GDP 

Next, the ECB adjusted their GDP expectations down from 1.7% to 1.1% for 2019. The adjustment came as a result of uncertainty surrounding global trade tensions and the unknown impact of Brexit. This sent a message to markets that profit increases should not be expected. 

China GDP 

Lastly, China reduced their GDP expectations down to 6% from 6.5%. Reductions were made as a result of trade tensions, but also due to self-imposed adjustments to their economic structure. These adjustments have been slowing economic expansion as they move from a fixed investment economy to a consumption economy. Likely trade conflicts have just accelerated the slow down. 

Conclusion 

Let’s recap:  Housing data was strong, unemployment fell to 3.8%, and the week started with promising data regarding trade. Yes, the US only added 20K jobs, but that was after an unexpectedly strong January. Projections of the global economy slowing down led to the markets rolling over.  Self-fulfilling the very thing they attempt to prevent. 

Your interest in our articles helps us reach more people.  To show your appreciation for this post, please “like” the article on one of the links below: 

 Facebook | Twitter | LinkedIn | Google+ 

FOR MORE INFORMATION: 

If you would like to receive this weekly article and other timely information follow us, here. 

Always remember that while this is a week in review, this does not trigger or relate to trading activity on your account with Financial Future Services. Broad diversification across several asset classes with a long-term holding strategy is the best strategy in any market environment. 

Any and all third-party posts or responses to this blog do not reflect the views of the firm and have not been reviewed by the firm for completeness or accuracy.