September Market Update: Prudent Risk Management

The S&P 500 posted a -1.81% return for the month of August. The trailing 1-year return for the S&P 500 as of August 31, 2019 was a wee 0.86%. The concern in the market is that, a bit over a decade into the recovery from the financial crisis, a trade war between the U.S. and China could create a substantial drag on the global economy and push the U.S. into recession. When the 3-month T-Bill and 10-Year Treasury bond curve inverts for one quarter which it did at the end of June, it historically has been a warning signal to investors that they need to reduce risk exposures of their investments. To learn more about this phenomenon please listen to Men Faber's podcast episode #172 with Professor Cam Harvey. Campbell Harvey is Professor of Finance at the Fuqua School of Business, Duke University and a Research Associate of the National Bureau of Economic Research in Cambridge, Massachusetts and he wrote his 1986 dissertation on the topic of yield curve inversions preceding recessions. Let's review price, sentiment and valuation as we enter September 2019.