Weekly Investment Strategy

Key Takeaways

  • Hopeful the US & Major Trading Partners Will ‘Come Together’
  • Here Comes Seasonality to Help Equity Market Be ‘All Right’
  • US Consumer to ‘Move’ the US Economic Expansion Further

Yesterday marked the fiftieth anniversary of the release of ‘Abbey Road,’ The Beatles’ eleventh studio album. Although it was not their final album, it did contain the last recording sessions in which all four members participated. ‘Abbey Road’ rocked the charts, surging to the coveted ‘#1 spot’ in both the UK and US. From the record-setting songs to the iconic cover art, ‘Abbey Road’ has me feeling nostalgic, but of course, I couldn’t help but notice several correlations to the economy and financial markets too.

  • Album Artwork | For the first time on a Beatles’ album, the cover design contained neither the title nor the group’s name. It was simply the ‘Fab Four’—John Lennon, Paul McCartney, George Harrison, and Ringo Starr—striding along a zebra crossing on Abbey Road, just outside their London recording studio. The synchronized walk quickly became one of the most iconic album covers, and to this day, fans flock to the block just to follow in the band’s footsteps. Today there is another historic synchronized movement taking place as central banks across the globe adopt a more accommodative stance amid slowing economic momentum, heightened recessionary fears, and trade tensions. The Federal Reserve (Fed), European Central Bank, the Reserve Bank of India, and the People’s Bank of China, among others, have each cut interest rates this year. We anticipate that weak global growth and muted inflation will lead to more cuts, led by the Fed taking at least one more insurance cut (likely in December) by year end.
  • Something in the Way the US Moves | We believe the US economy will continue to expand and be a pillar of strength for the global economy. The reason - the ongoing strength of the US consumer and its ability to drive growth going forward. In the second quarter, personal consumption was strong and posted its highest contribution to gross domestic product (GDP) in five years. US consumer spending currently accounts for ~70% of US GDP and ~15% of global GDP (roughly in line with the size of China!). With the holiday shopping season approaching, we expect that the US consumer will ‘move’ the economic expansion further. According to the National Retail Federation, consumers spent a record $701 billion during the 2018 holiday season. Healthy confidence, solid job creation, and increasing wages should propel holiday shopping to another record high this year.