Earning’s Season Has Arrived
We will now see if earnings expectations of projected significant growth come to fruition and if the results move equity markets safely into positive territory for the year. As of last Friday, the equity market as a whole is down insignificantly.
Last week witnessed most equity indexes up between 1 and 2 %, getting us close to the flat line for 2018.
Earnings reports began last Friday with a few large banks reporting excellent results. However, commercial lending was not as expected; perhaps the large corporate tax cuts are leaving more companies with more cash on hand and less need to borrow, for now.
Tariffs, White House Musical Chairs, Facebook, Russia and now Syria
Just what the markets need! We don’t already have enough on our plate, and now Syria decides to use chemical weapons and President Trump, not to be linked to President Obama, decided to launch an offensive to encourage Syria from refraining from this type of behavior. Or perhaps, it was to show the world we mean business. In either case, geopolitics is beyond my pay grade so I can only guess as to the true reasons. I do find the market resilience to be somewhat comforting, for now.
I don’t know about you, however to me, it seems there is a new topic each week. Hopefully the weekly topics turn positive and we can focus on what are the best policies going forward.
Economic Data for the Week
Last week reports showed United States Core Consumer Prices rose .18% as expected. The minutes from the March Federal Reserve meeting showed a firmer inflation outlook as members expect headline inflation to reach 2% by 2019 instead of 2020.
The 10 Year US Treasury ended the week with a yield of 2.83%, up from 2.78% the prior week.
Paul’s Take – Going Forward
April is historically one of the best months for the equity markets. If Corporate Earnings meet or exceed somewhat high expectations, we may see the markets respond positively. If all of the “noise” around the markets calm, perhaps we can get back to something somewhat normal. But don’t forget, we are in an interest rate rising cycle with the Fed looking to raise rates a couple more times in 2018 and continue the trend in 2019. The Fed is also reducing its balance sheet which can also pressure rates to move higher. At some point, higher interest rates tend to stop the smooth ride of the equity markets. When will that happen?
Time will tell, as always!