Market Commentary, 08/01/18
Last week, U.S. markets closed mixed with the Dow up 1.5%, the S&P gaining 0.6% and the Nasdaq down 1.0%. All three indices started the week with a decline, but have reversed course and more-or-less made up the early week drop.
By Friday (07/27/18), of the 53% of S&P 500 companies that had reported 2018 Q2 earnings, 83% reported earnings increases from the same period last year and if this trend holds, it will be the highest percentage of companies reporting year-over-year earnings increases since FactSet began tracking this metric in 2008. (Source: Factset)
Economic news has continued positive despite concerns about trade. In fact, the Trump administration has been using our economic gains as leverage in pressing other nations for trade concessions. The argument goes something like, “… the fact that you tax our goods at a higher rate than we tax your goods is hurting you more than us.” For example, regarding 2018 Q2 GDP growth (annualized), ours was 4.1%; Mexico was minus .3%; the Eurozone was 1.4% and Canada was 3.3% (www.wsj.com).
In addition to strong GDP numbers, the Department of Labor (www.bls.gov) reported that wages and salaries grew 2.8% in the past year. Further, Americans are saving and spending more. Last year, households saved or invested 6.7% of their income compared to 3.4% in 2016 and personal consumption expenditures increased 1.5% in 2018 Q2. Despite worker shortages, in July 219,000 jobs were added (170,000 were expected) and most of the new jobs were in the private sector (this is the largest increase since February according to bloomberg.com. June unemployment was 4%, up from 3.8% in May; the increase is largely the result of the increased labor force participation rate.
The summary statement is that the stock market has reflected the fact that the U.S. economy is doing well. But the stock market is still uncertain about trade; when that issue is resolved we may see a return to the market high of January (Dow 26,600) and at that point we’ll consider moving dollars from the market to cash.
Wayne Copelin, CFP®
President, Copelin Financial Advisors, Inc.
514 Brooks Street
Sugar Land, TX 77478
Phone (281) 240-2902
Fax: (281) 240-2856
Securities offered through ProEquities, Inc., a Registered Broker-Dealer and Member FINRA & SIPC Advisory Services offered through Harvest Investment Services, LLC., a Registered Investment Advisor Copelin Financial Advisors, Inc and Harvest Investment Services, LLC are independent of ProEquities, Inc.