Trade Conflict
President Trump announced a list of tariffs on an additional $200 billion in Chinese goods.1 With no resolution on the horizon, the world is now awaiting President Trump’s decision on how he will implement the proposed tariffs.The President also met with European Commission President Jean-Claude Juncker in an attempt to avert a U.S.-E.U. trade war. The meeting resulted in the European Union announcing that it would lower industrial tariffs and import more U.S. soybeans. The U.S. State Department also instructed European Union embassies to identify business areas “ripe for lowering of tariffs or cutting of red tape”.2The U.S. and Mexico reached a preliminary agreement to revise NAFTA. With U.S. negotiations with Canada failing to produce an agreement, both Mexico and the United States indicated a willingness to move forward with a bilateral trade agreement, excluding Canada.3
Q2 Earnings Season
Companies reported second-quarter earnings, with the large majority reporting successful results: 80% of companies in the S&P 500 reported positive earnings surprises72% of companies in the S&P 500 reported positive sales surprises. The average earnings growth rate of all reporting companies was 25% 4 However, future projections painted a less rosy picture. When forecasting future earnings, 72 companies in the S&P 500 lowered their full-year projections, while only 24 companies raised full-year projections. Popular explanations for lowered guidance included trade conflict and currency issues related to a strengthening U.S. dollar. During quarterly earnings conference calls, corporations discussed the impact of tariffs more frequently than any other time since the Financial Crisis.
Longest Bull Market
On August 23rd, U.S. stocks achieved an important milestone- the longest bull market on record. Since May 2009: S&P 500: +320% DJIA: +300% Nasdaq: +520%.
Despite the longest run in history, the ride has not always been smooth. The market has seen a number of significant drops due to issues ranging from Greek bankruptcies to the Brexit Vote.
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