Re: Earnings, the Trade War, & the Fed- Monday Morning Market Memo – July 22, 2019

Re: Earnings, the Trade War, & the Fed- Monday Morning Market Memo – July 22, 2019

Good morning,

Taking a look at the above in reverse order – Wall Street is certain the Federal Reserve is going to lower interest rates this month – as the CME FedWatch Tool puts the probability of a rate cut at 100%. The only debate at this point is whether it will be ¼ point or ½ point cut, with the tool assigning over a 72% chance it will be ¼ point. We’re playing the odds on this one, and think it will be a ¼ point cut as well, although things could possibly change before the July 30-31 policy meeting, increasing the odds of ½ point cut.

Something that hasn’t changed much of late is the situation with the trade war between the U.S. and China. The cease-fire is holding so far and neither side seems in a hurry to interfere with the status quo. The market does not appear to be worried about the lack of progress, as all three major indices are trading near record highs. In addition to watching the Fed and US-China trade relations, the stock market is also in the midst of another earnings season!

Earnings season kicked off last week highlighted by reports from the big banks, with the group posting better-than-expected earnings, (although there are concerns going forward as to how declining rates will impact profits). The pace of earnings reports really picks up in the week ahead with about 25% of the companies in the Standard & Poor’s 500 Index scheduled to announce results. Notable companies reporting this week include Visa, Coca-Cola, AT&T, Facebook, Boeing, Alphabet,, Intel, and McDonald’s.

Overall, at the start of this earnings season, expectations were for second quarter S&P 500 earnings to have fallen 3%, according to data from FactSet Research. As always, call us with any questions you may have or if you would like to set up a meeting.

All the best – Southport Station Financial Management, LLC