Markets, Economy

Weekly Kickstart (09/17/2018-09/21/2018)

9/17/18 8:00 AM

iStock-626627280.jpgStocks rebounded last week, as the S&P 500 rose by 1.16 percent to 2,904.98. That left the benchmark index up 8.65 percent year-to-date, and just 0.31 percent below the record close. Despite the solid gain, the price action was quite choppy during the past few trading sessions due to an influx of economic data and other headlines for investors to digest. For example, there was some good news in relation to the trade tensions between the United States and China, as rumors broke on Wednesday that the White House would pursue another round of negotiations with Beijing officials before imposing an additional $200 billion in tariffs. President Trump released a conflicting statement later in the week but the fact remains that any progress towards a deal would be an encouraging development considering that the Federal Reserve’s latest “Beige Book” showed that recent U.S. trade policy has already “contributed to rising input costs (inflation),” and “prompted some businesses to scale back or postpone capital investment.”

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Also offsetting some of the market’s cautious optimism around a potential trade accord was hurricane Florence, which despite weakening prior to making landfall is still estimated to have delivered as much as 40 inches of rain in many places. Some traders might have turned cautious (sold) before the storm struck the east coast due to concerns that the destruction resulting from the extreme weather would severely disrupt economic activity in the region. Although such weakness is definitely possible, historically the rebuilding efforts following a hurricane have often turned into an economic stimulus. Moreover, Bank of America Merrill Lynch analysts after hurricanes Harvey and Irma stressed that “natural disasters tend to reallocate growth, serving as a drag in the quarter when the disaster hits and a boost in later periods,” a fairly accurate assessment given the continued strength seen in both the stock market and the overall economy during the past year. Altogether, hurricane Florence will likely serve as another source of uncertainty for equities in the near-term and join the growing list of potential volatility catalysts. Any retail investors worried about navigating this environment should consider consulting with a professional financial advisor and as always, we are here to help with any questions you may have.

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To recap a few of the things we learned about the economy last week, the positives included that industrial production picked up, capacity utilization increased, consumer sentiment rebounded, small business owner optimism rose to the best level on record, the quits rate (an unbiased measure of consumer confidence) hit an all-time high, initial jobless claims held near a half-century low, total job openings in the United States once again outnumbered the number of unemployed Americans, and measures of household, wholesale, and trade-related inflation pressures unexpectedly softened. As for the negatives, mortgage applications declined, revolving credit (credit card) growth continued to cool, core services prices rose for third straight month, and retails sales disappointed forecasts. This week the pace of economic data slows down considerably but there are still a few important reports on manufacturing, housing, and employment scheduled to be released.

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**A more detailed snapshot of the U.S. economy can be found here.**

What To Watch:

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Sources: Econoday, Bloomberg, BofAML, FRBSL

Post author: Charles Couch

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