LPL Research on CNBC. Chief Investment Strategist John Lynch was on CNBC’s Squawk Box this morning discussing market and economic drivers to watch. View the full interview here.
Update on Trade negotiations. High-level negotiations between U.S. and Chinese officials concluded late last week. Reports and interviews with top officials suggest progress was made, but enforcement remains a key concern as history suggests China could be quick to agree but slow to implement the terms of a treaty. As a result, uneven headlines are likely to continue, and existing tariffs may very well remain in place after the March1 deadline, though indications are that Presidents’ Trump and Xi are likely to meet at the end of the month, which suggests sufficient progress is being made to warrant their meeting.
Earnings season nearing the halfway mark. With 46% of S&P 500 Index companies having reported, fourth quarter earnings growth is tracking to a 15.5% year-over-year increase, in line with expectations on January 1, 2019 and about one percentage point higher than last week. Upside has been driven by the energy and industrials sectors, while results for financials and technology have come up short thus far. S&P 500 earnings estimates for the next 12 months have been reduced by 2.6% year to date–consistent with long-term averages–amid slower economic growth, trade tensions, and the government shutdown. This week is another busy one with 97 S&P 500 companies slated to report fourth quarter results.
That was the easy part… U.S. stocks are off to a roaring start in 2019, as the S&P 500 just capped its best January in more than 30 years. However, that was the easy part (after heavily oversold conditions), and the next leg up will depend on developments with trade, corporate earnings, and monetary policy. In this week’s Weekly Market Commentary, we’ll examine technical signs we’ve seen that hint to further strength, and the fundamental argument for why we think U.S. stocks can eventually move higher.
The Fed’s U-turn. The Federal Reserve (Fed) just delivered a widely expected, but important monetary policy decision. Last week, the Fed left rates unchanged, removed language from its policy statement that “some further gradual (rate) increases” would be consistent with economic conditions, and added language that it would be patient when determining future rate adjustments. While the Fed’s gradual shift in messaging has appeased investors for now, it raises many questions on the future path of policy. In this week’s Weekly Economic Commentary, and on the LPL Research blog today, we’ll tackle a few of these questions.
Week ahead. The economic calendar is rather light next week, but another round of Markit PMI data will be on investors’ radars, particularly in Europe. Corporate earnings will be the main focus in the U.S., with 97 S&P 500 firms set to report, including Google, Disney, and General Motors. Track these and other important events on our Weekly Global Economic & Policy Calendar.
- Trade Balance (Dec)
- Markit US Services PMI (Jan)
- Markit US Composite PMI (Jan)
- ISM Non-Manufacturing Index (Jan)
- Markit Germany Services PMI (Jan)
- Markit Eurozone Services PMI (Jan)
- Markit/CIPS UK Services PMI (Jan)
- Eurozone Retail Sales (Dec)
- Nonfarm Productivity (Preliminary. QoQ, Q4 2018)
- Initial Jobless Claims (Feb. 2)
- Japan Leading Index (Preliminary, Dec)
- Japan Coincident Index (Preliminary, Dec)
- Bank of England Rate Decision
- Japan Current Account Balance (Dec)
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