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Stocks Up as Data Comes In

I often describe our approach to investment management as a “bifocal” approach.  This Friday is our next Investment Committee Meeting and we’ll be reviewing and analyzing a ton of data, focusing not just on what’s going on now but also looking for trends to take advantage of to better grow and protect our clients’ wealth.

Last week was good for domestic equities, but not so much for international stocks. Once again, trade and corporate earnings were in the news and we learned that the U.S. is considering increasing tariffs on $200 billion of Chinese imports. In response, China announced their own tariffs ranging from 5%–25% on $60 billion of U.S. products.[i]

Corporate earnings season also continued, and so far, more than 78% of S&P 500 companies have beaten estimates.[ii] If the trend holds, the 2nd quarter will likely average more than 20% growth in earnings per share. Companies have also detailed positive perspectives for the rest of 2018, showing that this strong corporate performance should continue.[iii]

Of course, last week’s trade and earnings weren’t the only topics on investors’ minds. We also received a number of data reports that shaped our understanding of the economy’s health.

Key Findings from Last Week

Consumers are earning and spending more.

The latest data for personal consumption and personal income revealed both measures increased by 0.4% in June. In addition, the report included revised data from 2013–2017, which indicated that people earned $1.05 trillion more during that time period than initially thought.[iv]

Tariff concerns are affecting manufacturing.

The manufacturing sector continues to expand at a faster rate than in 2017, but the pace of growth slowed more than anticipated in July. Respondents to the ISM Manufacturing Index survey shared concerns about tariffs, steel and aluminum disruptions, and transportation challenges.[v]

The Federal Reserve is on track for a September rate hike.

The Fed didn’t raise rates this month, but projections show a 93.6% chance that it will do so in September.[vi] The latest jobs report detailed steady wage increases, which helped ease Fed concerns about inflation.[vii]

This week is relatively light on economic data, but we will continue to analyze last week’s reports and the remaining corporate earnings releases. If you have any questions about where the economy is today or what may lie ahead, we’re here to talk.

ECONOMIC CALENDAR

Tuesday: JOLTS

Thursday: Jobless Claims

Friday: Consumer Price Index


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Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance, S&P Dow Jones Indices and Treasury.gov. International performance is represented by the MSCI EAFE Index. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.

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[i] https://www.cnbc.com/2018/08/03/us-stocks-point-to-lower-open-as-investors-await-jobs-report.html

[ii] https://www.reuters.com/article/us-usa-stocks/wall-street-gains-as-upbeat-earnings-trump-trade-jitters-idUSKBN1KO1IH

[iii] https://www.barrons.com/articles/after-the-bell-stocks-steamroll-tariff-and-job-worries-to-end-higher-1533330996

[iv] https://www.ftportfolios.com/Commentary/EconomicResearch/2018/7/31/personal-income-and-personal-consumption-both-rose-0.4percent-in-june

[v] https://www.bloomberg.com/news/articles/2018-08-01/u-s-manufacturing-cools-as-orders-gauge-falls-to-one-year-low

[vi] https://www.cnbc.com/2018/08/03/us-stocks-point-to-lower-open-as-investors-await-jobs-report.html

[vii] http://wsj-us.econoday.com/byshoweventfull.asp?fid=485658&cust=wsj-us&year=2018&lid=0&prev=/byweek.asp#top

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This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is not indicative of current or future performance and is not a guarantee. The investment opportunities referenced herein may not be suitable for all investors.

All data and information reference herein are from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other information contained in this research is provided as general market commentary, it does not constitute investment advice. The team and HighTower shall not in any way be liable for claims, and make no expressed or implied representations or warranties as to the accuracy or completeness of the data and other information, or for statements or errors contained in or omissions from the obtained data and information referenced herein. The data and information are provided as of the date referenced. Such data and information are subject to change without notice.

This document was created for informational purposes only; the opinions expressed are solely those of the team and do not represent those of HighTower Advisors, LLC, or any of its affiliates.