A lot can happen in two weeks – and you don’t have to be a fan of the great romantic comedy Two Weeks Notice to know that – just take a look at the economy and markets. (I do believe Sandra Bullock and Hugh Grant are both incredible comedic actors!)

Think about it, in the past two weeks we have contended with:

  • The S&P 500 Index (S&P 500) making a new, all-time high (Chart A)
  • Q1 GDP growth coming in at a much better than expected 3.2%
  • The VIX – Wall Street’s “Fear Index” – spiking 50% (Chart B)
  • The US unemployment rate falling to a 50-year low of 3.6%
  • The S&P 500 dropping 130 points, or 4.4%, peak to trough

Chart A

Chart B

The torrent of good news, bad news, and market volatility begs the question, what is going on? In a word – or in a few – concerns over US/China trade relations bumped up against strong economic growth and bullish investor sentiment. Said more plainly, the US economy has been surprising to the upside and that strong performance has been reflected in a robust rally for US equities and very bullish investor sentiment. So, when President Trump took a surprisingly hawkish tone toward China many investors quickly looked past strong near-term economic performance and began to price in a potential, trade war driven, economic slowdown – and did so in pretty jarring fashion.

Bumpy markets are never fun, and we do expect volatility to persist. We also see the US and China resolving their differences over trade. For now, we remain optimistic on the US economy and US equities.

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Brinker Capital, Inc., a registered investment advisor.

Chart source: FactSet

Tagged: Tim Holland, trade wars, US/China trade, VIX, weekly wire