August retail sales matched forecasts, advancing 0.6%. The latest reading is the 7th consecutive monthly increase. Consumer sentiment reached a 14-month high. The index of leading economic indicators (LEI) for August will be released this Friday. We look for this reading to confirm a strengthening U.S. economic growth picture.
Credit Market Indicators:
Real and Nominal Yield Curves YTD change – Treasury Yield Curve
The nominal curve has flattened significantly since the beginning of the year, with long term rates dropping and more recently, intermediate term rates increasing. Within the last 2 weeks, however, strength in bonds has reversed course. Just in the month of September, there has been a 20 basis point move higher in the 10 year note. At the shorter end of the curve, the 2 year note has moved up 5 basis points since August.
Current Shiller CAPE Ratio:
The CAPE ratio remains significantly higher than its historic mean of 16.55 with a Shiller PE Ratio of 26.24 at the close of market Friday.
The VIX ended last week at a 13.31 level. Volatility picked up last week on general market weakness and increased uncertainty related to geopolitical events in Eastern Europe and in the Middle East.
Near term momentum strongly favors domestic stocks over developed international equities. Emerging market stocks and REITS two of the more resilient asset classes during the past several weeks were among the weakest categories last week.*