Market Commentary, 08/20/18
Last week both the Dow and S&P 500 had a rocky start, but both had a mid-week surge to finish up 1.4% and 0.6% respectively. The S&P 500 actually closed the week just 0.8% below its high, set on January 26th. The Dow gained 396 on Thursday, which is its largest daily gain in more than four months. The Nasdaq, however, did not fare as well and finished the week with a modest decline of 0.3%.
The late-week rebound is likely due to what is being referred to as a “modest breakthrough” in the U.S./China trade talks, as both agreed to meet later this month. This would be the first time in over two months that the countries have met to discuss trade. While it is unlikely that these conversations will solve the trade concerns, it is seen as a step in the right direction. This trade dispute has hit the Chinese stock market and currency hard, but has missed the U.S. economy for the most part, leading some to speculate that China is more likely to compromise to return order to their market. (www.wsj.com)
U.S. retailers reported strong quarterly results, led by Walmart’s strongest same-store sales growth in 10 years, helped provide a catalyst for stocks in the home stretch of earnings season. In addition, the Commerce Department reported that retail sales exceeded economists’ forecasts, increasing 6.4% year over year. According to Gregory Daco, chief U.S. economist at Oxford Economics, “The July retail sales report indicates that the momentum heading into the third quarter remains solid, which bodes well for consumer demand and overall economic growth.” (Source: Sherman Sheet)
The news of the week will come on Friday as Federal Reserve Chairman Jerome Powell will deliver a speech at the Fed Symposium in Jackson Hole, Wyoming. This end of the summer meeting should give the market an indication of the monetary policy through the end of the year. A third interest rate increase is expected in September, but a fourth in December is uncertain. The Fed has referenced economic strength in prior meetings, but the confirmation of a fourth rate increase and continued balance sheet reduction would be extremely positive for the economy. (www.bloomberg.com)
The potential trade talks and the growth of U.S. retailers both bode well for the market and are in-line with our positive outlook for the economy for the third quarter. The Fed meeting will give us further insight not only for the 3rd quarter, but should hint at their expectation for the 4th quarter as well.
Wayne Copelin, CFP®
President, Copelin Financial Advisors, Inc.
514 Brooks Street
Sugar Land, TX 77478
Phone (281) 240-2902
Fax: (281) 240-2856
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