China Deal Looking Illusive
It certainly looks as of now, that a China deal prior to our upcoming 2020 US Presidential Election may not happen…the war just intensified with President Trump announcing a 10% tariff on the $300 Billion of remaining Chinese imports to begin September 1st. This domestic tax will apparently be directed at Consumer goods. The impact may be felt directly in the wallets of US consumers.
The Federal Reserve announced, as expected, a .25% rate decrease. However, the Fed identified the rate cut as a “mid-cycle” adjustment and not the start of an easing cycle. The markets in my opinion had priced in 3, .25% rate decreases over the next several months, which explains the pullback in the equity markets. President Trump called out the Fed suggesting the cut should have been deeper. So, with the likelihood that a China deal will NOT be done anytime soon, another round of taxes on imported Chinese goods, and China now pushing their currency to record lows, most likely Jerome Powell will again change his mind and move rates lower in the coming months. How many times will Powell change his mind during his tenure. Again, I really do miss Janet Yellon!
Approximately 76% of the S&P 500 companies have reported 2nd quarter earnings with 74% topping consensus expectations. Profits are on track for a 2.7% year-over-year increase. Prior to the beginning of the reporting season, earnings were widely expected to show a slight decrease because of the tariff situation.
The markets didn’t like anything that happened last week with the Dow slipping (2.59%), the S&P500 (3.07%), the Nasdaq Composite down (3.92%) and the Russell 2000 (2.85%). The International Stock Indexes didn’t fare any better with the MSCI EAFE Developed Market Index losing (2.84%) and the Emerging Market Stock Index down (4.24%).
Bonds as expected increased .98% as represented by the Barclay’s Aggregate Bond Index which is now up 7.14% year to date last Friday. The yield on the 10 Year US Treasury closed last Friday @ 1.85% down from 2.07% the week prior. Remember it wasn’t too long ago (mid 2018) that the 10 Year Rate hit 3.25% and most people thought the direction was higher. Not this advisor!!
Question of the Week…
What is the Oldest Hamburger Chain in the United States?
- Burger King
- White Castle
Answer to last week’s question…!
Who is the longest tenured Federal Reserve Chairperson?
1. Ben Bernanke
2. Marriner Ecles
3. Alan Greenspan
4. William Martin
The answer is #4 William Martin – who served 18 years and 9 months from 1951 through 1970. Alan Greenspan was 2nd having served 18 years and 5 months from 1987 through 2006.