Market Update: Monday, June 18, 2018

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Daily Insights

  • Trade worries drive stocks lower. Nothing over the weekend was particularly surprising on the tariff front, though fears of further escalation preceded the S&P 500 Index opening more than half a percent lower this morning. Some were perhaps looking for a last-ditch effort to prevent tariffs on about $50 billion of Chinese imports from being implemented, which did not come to pass. Last week’s stock market calm–it was the narrowest week of trading all year–suggests market participants remain optimistic that a full-blown trade war will be averted. Nonetheless, another round or two of retaliation may be in store over the coming weeks, which could cause additional short-term market volatility. An immigration crisis in Germany that could threaten Angela Merkel’s coalition is not helping sentiment this morning either.

  • Capex has been rebounding and has the means, motive, and opportunity for a sustained run. We are seeing on-going signs of a rebound in business spending and investment (capital expenditures, or “capex”), and believe the trend is likely to continue. Lower tax rates and the repatriation of foreign profits are giving businesses the means to invest; business confidence and a tight labor market are providing the motive; and provisions in the tax law incentivizing capex and a still solid global growth backdrop are providing the opportunity. In this week’s Weekly Economic Commentary we take a closer look at capex spending, which we believe is key to generating productivity gains that could produce a sustainable pick-up in economic growth and the possible extension of our 2.75-3.0% 2018 growth estimate* later into the cycle. Also due out later today, in our Weekly Market Commentary we discuss two ways to play the capex theme: industrials and technology.

  • The week ahead. After a dizzying series of events last week, the economic calendar slows down this week. On the domestic front, the housing market will be in focus, while Markit’s Purchasing Managers’ Index data headlines the economic data releases overseas with figures for France, Germany, the Eurozone, and Japan due out. WTI crude oil watchers will keep an eye on Friday’s OPEC meeting where members (plus Russia) reportedly do not see eye to eye on whether to increase production and by how much.

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Click Here for our detailed Weekly Economic Calendar

Monday

  • Russia: GDP (Q1)

Tuesday

Wednesday

Thursday

Friday

  • Markit Mfg. PMI (Jun)
  • France: GDP (Q1)
  • France: Markit Mfg. PMI (Jun)
  • Germany: Markit Mfg. PMI (Jun)
  • Eurozone: Markit Mfg. PMI (Jun)

 

IMPORTANT DISCLOSURES

*Please see the Outlook 2018: Return of the Business Cycle publication for additional description and disclosure.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in this material may not develop as predicted.

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All performance referenced is historical and is no guarantee of future results.

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