PAS Weekly Commentary

Stocks Extend Rebound Rally into September, Cyclical Sectors Set the Pace

The stock market rallied for the second straight week, supported by developments in trade and politics and encouraging economic data. The S&P 500 (+1.8%), Nasdaq Composite (+1.8%), and Dow Jones Industrial Average (+1.5%) each increased at least 1.5%. The Russell 2000 (+0.7%) trailed its larger‐cap peers.

This week's leaders included the cyclical S&P 500 consumer discretionary (+2.6%), energy (+2.6%), and information technology (+2.4%) sectors ‐ all of which rose over 2.0%. The defensive‐oriented utilities (+0.4%) and health care (+0.7%) sectors were the lone groups that increased less than 1.0%.

The shortened trading week began on a lower note, as retaliatory tariffs from the U.S. and China went into effect and data from the ISM showed the U.S. manufacturing sector slip into contraction territory in August for the first time since 2016. Stocks rallied sharply over the next two days, though, as Hong Kong said it would withdraw its extradition bill and China said it agreed to meet in Washington for trade talks in early October.

The takeaway from the Hong Kong and U.S.‐China trade situations was that conditions did not deteriorate, which was good for sentiment. A slate of encouraging economic data, including solid growth in non‐manufacturing activity for August, helped stave off recessionary fears. The Employment Situation Report for August did show U.S. hiring activity slow down to a more modest pace, though.

Specifically, nonfarm payrolls increased by 130,000 ( consensus 171,000) and nonfarm private payrolls increased by 96,000 ( consensus 145,000). A closer look, though, showed that more people are working and earning money, which is a good recipe to support the economy expansion, one which Fed Chair Powell repeated the Fed is intent on sustaining.

U.S. Treasuries finished lower this week, pushing yields slightly higher. The 2‐yr yield increased two basis points to 1.52%, and the 10‐yr yield increased four basis points to 1.55%. The U.S. Dollar Index fell 0.5% to 98.42. WTI crude rose 2.5%, or $1.39, to $56.45/bbl.

The weaker dollar was another positive consideration for the market, especially for the earnings prospects of U.S. multinational companies. Some of its weakness was attributed to noticeable strength in the British pound as Parliament moved to block a no‐deal Brexit on Oct. 31.

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Past performance is not a guarantee of future results. Indices are unmanaged and one cannot invest directly in an index. Diversification does not guarantee investment returns and does not eliminate the risk of loss.

Data and rates used were indicative of market conditions as of the date shown and compiled by Opinions, estimates, forecasts, and statements of financial market trends are based on current market conditions and are subject to change without notice. References to specific securities, asset classes and financial markets are for illustrative purposes only and do not constitute a solicitation, offer, or recommendation to purchase or sell a security. S&P 500 Index is a market index generally considered representative of the stock market as a whole. The index focuses on the large-cap segment of the U.S. equities market. Each company’s security affects the index in proportion to its market value. NASDAQ Composite Index is a market value-weighted index that measures all NASDAQ domestic and non-U.S. based common stocks listed on the NASDAQ stock market. Dow Jones Industrial Average is a widely used indicator of the overall condition of the stock market, a price-weighted average of 30 actively traded blue chip stocks, primarily industrials, but also includes financial, leisure and other service-oriented firms. Russell 2000 Index measures the performance of the smallest 2,000 companies in the Russell 3000 Index of the 3,000 largest U.S. companies in terms of market capitalization. MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

Park Avenue Securities LLC (PAS) is an indirect, wholly-owned subsidiary of The Guardian Life Insurance Company of America (Guardian). PAS is a registered broker dealer offering competitive investment products, as well as a registered investment advisor offering financial planning and investment advisory services. PAS is a member of FINRA and SIPC.

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2019-85786 (Exp. 12/19)