Markets, Economy

Weekly Kickstart (09/03/2019-09/06/2019)

9/3/19 8:00 AM

iStock-626627280.jpgStocks rebounded last week, as the S&P 500 rose by 2.79 percent to 2,926.46. That was the first gain since late-July, the largest in twelve weeks, and it left the benchmark index up 16.74 percent 2019-to-date, and just 3.29 percent below the all-time closing high. The strong finish to the month of August was helped by another potential de-escalation in the trade war between the United States and China. Although encouraging, many disagreements remain between the two countries, so market participants are likely to be skeptical of any “breakthrough” in negotiations until some sort of substantive deal is actually announced. Further, September has historically been one of the worst performing months of the year for equities, and there is still a lot a lot of uncertainty surrounding global economic growth, domestic monetary policy, and a variety of other issues, so it would not be too surprising if volatility stays elevated in the near-term.

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Another possible headwind for the markets is Dorian, a major hurricane that could bring a lot of wind and rain damage to the east coast of the United States. Some traders might have already turned cautious (sold) before the storm makes landfall due to concerns that any destruction resulting from the extreme weather will severely disrupt economic activity. 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 two years. Regardless, hurricane season is still far from over, so severe tropical weather could serve as another source of risk for equities over the next two months. Any retail investors worried about navigating this potentially volatile 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 the nation’s trade deficit (in goods) narrowed, housing inflation eased, consumer spending jumped, demand for U.S.-made durable goods improved, a key gauge of business investment rose for the third consecutive month, and regional manufacturing activity rebounded. As for the negatives, mortgage applications pulled back, pending home sales declined, initial jobless claims edged higher, core capital goods shipments fell, Q2 GDP growth was revised slightly lower, household price pressures firmed, income growth moderated, consumer confidence deteriorated, and Americans’ personal saving rate decreased. This holiday-shortened week the pace of economic data picks up with several important reports on factory output, construction spending, foreign trade, service sector activity, productivity, and employment scheduled to be released. That includes the potentially market-moving August job report from the U.S. Labor Department due out on Friday and a handful of speeches from Federal Reserve officials.

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What To Watch:

Monday

  • US Holiday: Labor Day

Tuesday

Wednesday

Thursday

Friday

 

 

Sources: Econoday, Bloomberg, BofAML, CR, FRBSL

Post author: Charles Couch

Disclosures