Markets Looking Past June Performance to Clarity on Economic Data, Fed’s Next Move

July 18, 2019

BNY Mellon’s Lockwood issues Investment Insights for the third quarter, sees Fed expectations as market risk

King of Prussia, Pa. — Markets recorded their best June performance in decades and welcomed a recent change in tone from the Federal Reserve (“Fed”), but investors could be disappointed by strengthening economic data if the U.S. central bank chooses a less accommodative policy, according to the Investment Insights by BNY Mellon’s Lockwood Advisors, Inc. (“Lockwood”).

Despite the rally last month, markets have only marginally pushed above all-time highs set in 2018 and now stand very close to the valuation highs established last year.

“Markets now expect that global central banks are on a path for a coordinated global easing cycle, but that expectation has also become a risk for investors,” said Matthew Forester, chief investment officer at BNY Mellon’s Lockwood Advisors and the author of the report. “The Fed will likely attempt to characterize any rate cuts in the second half of 2019 as ‘insurance’ designed to maintain the continued expansion, now the longest since the Civil War.

“The best-case scenario for markets would be for some modest recovery in U.S. and global economic data in the second half of 2019. This outlook could turn brighter if there is resolution to the trade conflict between the U.S. and China.”

Highlights from the report include:

  • Keep an eye on the correlation between stocks and bonds
    The relationship between stocks and bonds typically begins to change when markets detect a greater concern about the level of economic output. The correlation between these asset classes—as measured by the S&P 500® Index and the Barclays U.S. Bond Aggregate Index—is beginning to trend lower after a long stretch of elevation.
  • Managing inflation expectations
    Recent data from the New York Fed shows that consumers’ expectations for inflation have declined meaningfully since late last year. If inflation continues to surprise to the downside, the Fed could respond to this challenge by providing additional stimulus.
  • Be wary of high-yield credit in market downturn
    While many investors have moved into uncharted waters to reach for yield, it’s important to note the specific characteristics of bonds, particularly in periods of market stress. In such an environment, for example, high yield credit could decline in a similar fashion to equity investments.
  • Think long term
    Advisors and investors should always manage to their longer-term goals and, so far this year, markets have continued to climb despite a cloudier outlook. The relatively benign current market conditions offer an opportunity to reexamine fixed income and portfolio allocations to consider whether they may provide enough ballast for changes to market conditions over the balance of 2019.

For more information on these trends, please visit to view the full report and relevant disclosures.

This material is intended for informational purposes only and does not constitute investment advice or an offer or solicitation to purchase, hold or sell any securities. The opinions expressed by Lockwood are as of July 2019, and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by Lockwood to be reliable, but are not necessarily all inclusive. This material may contain forward-looking information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader.

About BNY Mellon’s Lockwood Advisors, Inc.

Lockwood Advisors, Inc. is a leading provider of managed account solutions. As a program sponsor, Lockwood offers access to some of the industry’s leading investment managers, provides independent research on separate account managers, and develops advisory solutions to help investment professionals meet the diverse needs of their clients.

Lockwood also offers discretionary portfolio management solutions through financial institutions and independent registered investment advisers. Lockwood Advisors, Inc. is an investment adviser registered in the United States under the Investment Advisers Act of 1940, an affiliate of Pershing LLC and a wholly owned subsidiary of The Bank of New York Mellon Corporation (BNY Mellon).

About BNY Mellon's Pershing

BNY Mellon’s Pershing is a leading provider of clearing and custody services. We are uniquely positioned to help complex financial services firms transform their businesses, drive growth, maximize efficiency, and manage risk and regulation.

Wealth management and institutional firms outsource to us for trading and settlement services, investment solutions, bank and brokerage custody, middle and back office support, data insights, and business consulting.

Pershing brings together high-touch service, an open digital platform and the BNY Mellon enterprise to deliver a differentiated experience for every client.

Pershing LLC (member FINRA, NYSE, SIPC) is a BNY Mellon company. With offices around the world, Pershing has over $2 trillion in assets and millions of investor accounts. Pershing affiliates include Albridge Solutions, Inc. and Lockwood Advisors, Inc., an investment adviser registered in the United States under the Investment Advisers Act of 1940. Additional information is available on, or follow us on LinkedIn or Twitter @Pershing.

About BNY Mellon

BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment and wealth management and investment services in 35 countries. As of June 30, 2021, BNY Mellon had $45.0 trillion in assets under custody and/or administration, and $2.3 trillion in assets under management. BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK).Additional information is available on Follow us on Twitter @BNYMellon or visit our newsroom at for the latest company news.