-May 24, 2019 Weekly Capital Market Update. U.S. equity markets were marked by a third week of losses on the heels of ongoing escalation with China-U.S. trade tariffs. The negative earnings impact is worrying U.S. companies; also geopolitical risk has spiked with the U.S.-Iran tensions in the Persian Gulf. Thus, the Nasdaq fell -2.29%, S&P 500 Index dropped -1.17% and the Dow Jones Industrial lost -0.69%. Mixed corporate earnings results from retailers contributed to the negative market tone. In terms of sectors, energy stocks performed worst within the S&P 500 Index, as oil prices suffered most with largest declines. In turn, defensive utilities were the stand out performer by banking record gains. Trade volume was rather low on the week and this may indicate that many investors remain on the sidelines and the markets’ current low expectations for a quick tariff resolution suggest that positive developments on trade could create a rebound in equities. Indeed, the technical pattern of this selloff feels more like a buyers’ strike than outright institutional selling. On the economic front, new home sales volume turned positive year-over-year and may yet finally contribute (positively) to GDP in 2019.
-May 18, 2019 Weekly Capital Market Update. Though markets rallied in the second half of the week, the U.S. equities could not overcome the sharp early-week losses: S&P 500 -0.76%, Dow Jones -0.69% and Nasdaq -1.27%. There is no clarity at this time as to resumption of U.S.-China tariff trade negotiations and equities values struggle with uncertainty (so far the depth of this pullback is measured at -4.5%). While the tariff toll tallied $4.4 billion per month in 2018, the tariff pales in comparison to the total U.S. consumer spending power of $14 trillion.
-May 10, 2019 Weekly Capital Market Update. The U.S. equity markets retrenched past gains after trade tensions unexpectedly escalated: S&P 500® Index -2.18%, Nasdaq declined -3.03% and Dow Jones Industrial Average -2.12%. U.S. trade negotiators reportedly told President Trump that China was backing away from some key commitments to a developing trade agreement and by Sunday, President Trump tweeted that trade negotiations with China were moving too slowly; he then later announced a tariff increase (from 10% to 25%) on $200 billion of Chinese imports effective Sunday. Both parties hit the negotiation table again until late Thursday and when an agreement failed to materialized, the U.S. initiated a 25% tariff on an additional $320 billion of imports from China. Trump is leveraging the strength of the U.S. economy to effectuate necessary systemic changes of fairness with China business and trade. From our prospective, the long-term potential benefits outweigh what appears to be current market stress and the market is simply revaluing both the lower likelihood of fast timetable and perhaps a reduced level of success (trade terms). What is also apparent is the first round of tariffs did not negatively impact U.S. GDP (Q1) and therefore this has emboldened the U.S. trade negotiations team. Finally, and again from our view, should this trade tariff exchange escalate, the markets would anticipate compensation by the Fed with a rate cut – this would likely offset a good amount of the tariff disruption costs overall. This equation is evident given at least on two trade days last week we had the markets down significantly, then a sizable recovery in the last hour of trading (indicating institutional “smart” money buying the dip).
-May 3, 2019 Weekly Capital Market Update. For the week, U.S. equity markets finished mixed, with the Nasdaq +0.22%, S&P 500 Index +0.20% and the Dow Jones Industrial -0.14%. The market continues to absorb the benefits of a Goldilocks economy, which is not too hot, yet not too cold – that usually is the ideal ingredients for growth and no Fed rate increases. The drivers of the market rally has been: 1) positive earnings surprises (76% of S&P 500 companies have reported a positive EPS surprise), 2) low inflation (1.6%), 3) accommodating Fed (no prospective rate hikes), 4) Q1 productivity grew at a hefty 3.6% pace, versus the 1.3% clip in Q4 and 5) near full employment economy (unemployment at 3.6%).
-May 18, 2019 Weekly Capital Market Update. Though markets rallied in the second half of the week, the U.S. equities could not overcome the sharp early-week losses: S&P 500 -0.76%, Dow Jones -0.69% and Nasdaq -1.27%. There is no clarity at this time as to resumption of U.S.-China tariff trade negotiations and equities values struggle with uncertainty (so far the depth of this pullback is measured at -4.5%). While the tariff toll tallied $4.4 billion per month in 2018, the tariff pales in comparison to the total U.S. consumer spending power of $14 trillion.
-May 10, 2019 Weekly Capital Market Update. The U.S. equity markets retrenched past gains after trade tensions unexpectedly escalated: S&P 500® Index -2.18%, Nasdaq declined -3.03% and Dow Jones Industrial Average -2.12%. U.S. trade negotiators reportedly told President Trump that China was backing away from some key commitments to a developing trade agreement and by Sunday, President Trump tweeted that trade negotiations with China were moving too slowly; he then later announced a tariff increase (from 10% to 25%) on $200 billion of Chinese imports effective Sunday. Both parties hit the negotiation table again until late Thursday and when an agreement failed to materialized, the U.S. initiated a 25% tariff on an additional $320 billion of imports from China. Trump is leveraging the strength of the U.S. economy to effectuate necessary systemic changes of fairness with China business and trade. From our prospective, the long-term potential benefits outweigh what appears to be current market stress and the market is simply revaluing both the lower likelihood of fast timetable and perhaps a reduced level of success (trade terms). What is also apparent is the first round of tariffs did not negatively impact U.S. GDP (Q1) and therefore this has emboldened the U.S. trade negotiations team. Finally, and again from our view, should this trade tariff exchange escalate, the markets would anticipate compensation by the Fed with a rate cut – this would likely offset a good amount of the tariff disruption costs overall. This equation is evident given at least on two trade days last week we had the markets down significantly, then a sizable recovery in the last hour of trading (indicating institutional “smart” money buying the dip).
-May 3, 2019 Weekly Capital Market Update. For the week, U.S. equity markets finished mixed, with the Nasdaq +0.22%, S&P 500 Index +0.20% and the Dow Jones Industrial -0.14%. The market continues to absorb the benefits of a Goldilocks economy, which is not too hot, yet not too cold – that usually is the ideal ingredients for growth and no Fed rate increases. The drivers of the market rally has been: 1) positive earnings surprises (76% of S&P 500 companies have reported a positive EPS surprise), 2) low inflation (1.6%), 3) accommodating Fed (no prospective rate hikes), 4) Q1 productivity grew at a hefty 3.6% pace, versus the 1.3% clip in Q4 and 5) near full employment economy (unemployment at 3.6%).