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Investors shrug trade tensions

AUG. 06, 2018
  • Quietly, the S&P 500 Index has climbed in five consecutive weeks, bringing us within 1% of an all-time high. The certainty of the fundamental strength is winning the tug-of-war versus the uncertainty of the trade war.
  • We are now more than 80% through earnings season and the blended growth rate is at 24%, higher than the 20% expected at the start of the season. Eighty percent have beat estimates, which is the best rate since FactSet began recording the data a decade ago. Estimates are improving for 2019, which is unusual historically, as estimates normally start higher and are adjusted down through time.
  • Trade rhetoric ramped last week, and there is evidence that the tangible impact is greater globally than domestically. PMI data shows a broad slowdown outside of the U.S., while domestic data continues to be quite strong.
  • We are now in an interesting seasonal time. Late summer and early fall are historically weak, with light trading and normally reactive investors. This is exacerbated in election years, where many will move to the sidelines during periods of uncertainty. It is possible given how close the midterms look and the range of potential outcomes, we will likely see inflated volatility over the next two months or so. That being said, the fundamental environment remains strong and supportive for positive returns.


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