Market Review

Monthly Market Review

Data as of August 31, 2019


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U.S. Stocks

Stocks recorded their first monthly loss since May, as the deepening U.S. trade conflict with China and global growth concerns weighed on sentiment. Stocks were also especially volatile, with the Cboe Volatility Index (VIX) touching its highest level since the start of the year. The smaller‑cap indexes fared worst, and the S&P MidCap 400 Index briefly joined the small‑cap Russell 2000 Index in correction territory, or down more than 10% from its August 2018 highs. At its low point on August 5, the large‑cap S&P 500 Index was 6.8% below its July 26 peak.

Within the S&P 500, the typically defensive and interest rate‑sensitive utilities and real estate sectors performed best. Energy stocks fared worst, falling over 8%, as investors worried about stubbornly high U.S. oil and gas inventories and slowing global demand. Financials shares were also weak as longer‑term bond yields fell to three‑year lows, threatening banks’ lending margins.

New Tariffs and Yuan Devaluation Mark Escalation in Trade War

The month started off on a decidedly down note. On August 1, stocks suffered their biggest intraday plunge since May, after President Donald Trump announced that the U.S. would impose a new 10% tariff on the roughly USD 300 billion in Chinese imports not currently facing duties. Investors may have been particularly concerned that the new, consumer‑oriented tariffs, slated for September 1, might have a broader and more visible impact on the U.S. economy than the USD 250 billion worth of mostly intermediate Chinese goods already taxed at a 25% rate. The head of the American Apparel & Footwear Association put it bluntly, telling CNBC that his members were “cooked” if the tariffs go through.

Stocks plunged again on August 5, following a return salvo from China. Chinese officials allowed the yuan to fall below 7.0 per U.S. dollar, a threshold that they kept the yuan from breaching over the past decade. T. Rowe Price traders noted that the move played into growing concerns that the trade war could devolve into a currency war, although Chinese officials pledged that they would not engage in a competitive devaluation. Nevertheless, the White House quickly punched back, formally labeling China a currency manipulator. The Treasury Department’s move was largely symbolic since China’s daily intervention in its currency is widely acknowledged—and most analysts believe that China intervenes to prop up the yuan, not to drive it lower. The yuan continued to fall through much of the rest of the month, reaching as low as 7.17 per dollar.

Total Returns




Dow Jones Industrial Average



S&P 500 Index



Nasdaq Composite Index



S&P MidCap 400 Index



Russell 2000 Index



Past performance is not a reliable indicator of future performance.
Note: Returns are for the periods ended August 31, 2019. The returns include dividends based on data supplied by third‑party provider RIMES and compiled by T. Rowe Price, except for the Nasdaq Composite Index, whose return is principal only.
Sources: Standard & Poor’s, LSE Group. See Additional Disclosures.

Trade Tensions Continue to Ratchet Higher, but Investors Look for Resumption in Negotiations

Stocks rallied periodically throughout August as both U.S. and Chinese leaders offered scattered conciliatory gestures and comments. The S&P 500 Index recorded its second‑best day of the month on August 13, after President Trump announced that some of the new tariffs would be delayed until December, so as not to interfere with the holiday shopping season—his first acknowledgment that U.S. consumers were bearing at least part of the tariff burden. Investors were later encouraged that the White House delayed a ban on U.S. firms doing business with Chinese telecom giant Huawei Technologies, easing tensions in what some have called an emerging “technological cold war.”

Investors were taken by surprise, therefore, when the trade dispute intensified once more later in the month. On August 23, China announced a new set of retaliatory tariffs on USD 75 billion in U.S. goods, ordered a halt to purchases of U.S. farm goods, and reinstated tariffs on imports of U.S. autos and parts. After the close of trading, President Trump tweeted that the U.S. would respond by upping its latest round of tariffs by 5%. The tit‑for‑tat exchange seemed to end there, however, helping stocks regain some of their losses over the final week of the month. Markets may have also received a lift from signs that both sides were preparing to resume negotiations in September.

Manufacturing Sector Slows, but Consumers Remain in Good Shape

The month’s economic signals were bifurcated. IHS Markit reported that its gauge of current U.S. manufacturing activity, which had been slipping for nearly a year, had reached levels indicating a contraction for the first time since 2009. The firm’s service sector gauge also fell more than expected, although it continued to indicate modest expansion.

Conversely, the U.S. consumer seemed to remain in solid shape, with improving conditions particularly evident among those with modest incomes and those recently reentering the labor force. Major discount retailers reported solid revenues, while core (excluding sales at gas stations and auto dealerships) retail sales jumped 1% in July. On the last trading day of the month, however, the University of Michigan reported that its consumer sentiment index for August had fallen by the most in almost seven years, hitting its lowest level since late 2016. The Michigan survey’s chief economist noted that the “data indicate that the erosion of consumer confidence due to tariff policies is now well underway.”

Neither Side May Be Willing to Compromise in Trade War

Many T. Rowe Price managers and analysts are not optimistic that the U.S. and China will reach a substantial trade deal before the November 2020 U.S. presidential election. Chinese officials may prefer to wait to negotiate with a potential Democratic successor and may be concerned that President Trump, if he is reelected, could seek new concessions in 2021. For his part, President Trump may perceive that the political benefits of a tough stance on China outweigh the damage done by a modest economic slowdown. T. Rowe Price Legislative Analyst Katie Deal notes that perceptions of China among the U.S. public have deteriorated markedly over the past year. Indeed, nearly four out five farmers—who are shouldering direct costs from closed Chinese markets—believe the trade war will ultimately be to their benefit.

Additional Disclosures

FactSet. Copyright 2019 FactSet. All Rights Reserved.

J.P. Morgan. Information has been obtained from sources believed to be reliable, but J.P. Morgan does not warrant its completeness or accuracy. The index is used with permission. The Index may not be copied, used, or distributed without J.P. Morgan’s prior written approval. Copyright © 2019, J.P. Morgan Chase & Co. All rights reserved.

London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). © LSE Group 2019. FTSE Russell is a trading name of certain of the LSE Group companies. “Russell®” is a trade mark of the relevant LSE Group companies and is used by any other LSE Group company under license. All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company’s express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication.

The S&P 500 Index and S&P MidCap 400 Index are products of S&P Dow Jones Indices LLC, a division of S&P Global, or its affiliates (“SPDJI”) and have been licensed for use by T. Rowe Price. Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC, a division of S&P Global (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); T. Rowe Price is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index and S&P MidCap 400 Index.


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Important Information

This material is provided for informational purposes only and is not intended to be investment advice or a recommendation to take any particular investment action.

The views contained herein are as of the date written and are subject to change without notice; these views may differ from those of other T. Rowe Price associates.

This information is not intended to reflect a current or past recommendation, investment advice of any kind, or a solicitation of an offer to buy or sell any securities or investment services. The opinions and commentary provided do not take into account the investment objectives or financial situation of any particular investor or class of investor. Investors will need to consider their own circumstances before making an investment decision.

Information contained herein is based upon sources we consider to be reliable; we do not, however, guarantee its accuracy.

Past performance is not a reliable indicator of future performance. All investments are subject to market risk, including the possible loss of principal. All charts and tables are shown for illustrative purposes only.

T. Rowe Price Investment Services, Inc., distributor, and T. Rowe Price Associates, Inc., investment advisor.

© 2019 T. Rowe Price. All rights reserved. T. Rowe Price, INVEST WITH CONFIDENCE, and the bighorn sheep design are, collectively and/or apart, trademarks of T. Rowe Price Group, Inc.

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