Markets, Economy

Weekly Kickstart (10/14/2019-10/18/2019)

10/14/19 8:00 AM

iStock-626627280.jpgStocks rebounded last week, as the S&P 500 rose by 0.62 percent to 2,970.27. That was the first weekly gain in a month, and it left the benchmark index up 18.49 percent 2019-to-date, and just 1.84 percent below the all-time closing high. The price action was very choppy during the past few trading sessions, with the S&P 500 at one point being down 2.01 percent on the week, and at another moment up 1.40 percent. This, as we explained in the prior two Kickstarts, was to be expected given the combination of negative seasonality and two-sided headline risk that investors would have to deal with. The trade war was once again the biggest driver of the intraday swings in stock prices, but the bulls were able to gain control after the rumors turned predominantly positive. Indeed, on Friday it was announced that the U.S. and China had “agreed on the outlines of a partial trade accord” that both President Donald Trump and China’s Xi Jinping could sign in the near future.

y783y54785

That may not sound like a particularly concrete deal, but it was a lot more than many market participants had anticipated and at the very least accomplished the goal of avoiding another escalation in tensions. In fact, the White House also scrapped its earlier plans to increase tariffs from 25% to 30% later this week on roughly $250 billion of Chinese imports, and China similarly exempted U.S. pork and soybeans, imports it desperately needs at the moment, from its own tariffs. Additional duties on $160 billion worth of Chinese products as of this writing are still scheduled for December 15th, but given the greater consumer impact that would result from these levies and the newfound optimism about the trade negotiations, a sustained rally in equities could depend heavily on these tariffs also being abandoned within the next two months (before the start of the holiday shopping season). Altogether, last week’s progress towards a trade deal is a welcome development, but clearly there is a lot of work left for negotiators to do. Add to this the uncertainty still surrounding monetary policy, the economy, corporate earnings growth, and a variety of other issues, and it would not be too surprising if market volatility remains elevated in the near-term. Any regular investors unsure how to navigate this environment should consider working with a professional financial advisor and as always, we are here to help with any questions you may have.

543yy34545

To recap a few of the things we learned about the economy last week, the positives included that mortgage applications rose, household balance sheets strengthened, inflation pressures eased, consumer confidence improved, initial jobless claims slid back to a near half-century low, job vacancies exceeded job seekers for the 18th consecutive month, and an indicator of U.S. workers’ willingness to give up their current job security for better employment opportunities remained elevated. As for the negatives, small business owner confidence cooled, and total job openings declined. This week the pace of economic data slows down but there are still a few important reports on factory activity, housing, consumers, and employment scheduled to be released, along with a handful of speeches from Federal Reserve officials.

45y3y35445

What To Watch:

Monday

Tuesday

Wednesday

Thursday

Friday

 

 

Sources: Econoday, Bloomberg, CNBC, FRBG, Twitter, FRBSL

Post author: Charles Couch

Disclosures