So much for quiet summer trading – volatility is back and the market has a “full plate” right now. Big picture items that are front and center for the financial markets right now include Federal Reserve policy, earnings season, and the US-China trade war.
The Federal Reserve, as totally expected, cut interest rates by ¼ point last week. The Fed referenced “muted inflation”, and Chair Powell called the cut a “midcycle adjustment”. Market participants, as usual, debated the implications of the statement and press conference, with some investors thinking the Fed was not dovish (accommodative) enough, putting some downward pressure on stock prices.
Earnings season continues in the week ahead. Notable companies reporting this week include Shake Shack, Walt Disney, CVS Health, Norwegian Cruise Lines, Kraft Heinz, and Booking Holdings. Looking at the scoreboard so far, with 77% of the companies in the Standard & Poor’s 500 Index reporting results, 76% have reported a positive Earnings Per Share surprise, (which is above the 5-year average), according to data from FactSet.
The trade war heated up last week after President Trump announced an additional 10% tariff on the remaining $300 billion of Chinese goods, that would become effective on September 1st. So the truce in the trade war is apparently over, and stocks posted their worst week of the year, with the benchmark S&P 500 falling 3.1% last week. Stocks opened lower this morning as well, after the trade war intensified. China allowed the yuan to drop to its lowest level in over a decade (meaning currency devaluation to boost its exports). Bottom line, a lot is going on right now, and don’t expect things to quiet down any time soon.
As always, contact us with any questions you may have, or if you would like to schedule a meeting.
All the best – Southport Station Financial Management, LLC