Telemus Weekly Market Review

July 16 – July 20, 2018

Wall Street kept its cool last week, despite the headlines coming out of Washington, finishing little changed. The S&P 500 finished up 0.02%, the Dow Jones Industrial Average gained 0.15%, and the Nasdaq Composite finished slightly lower, down 0.07%. The small-cap Russell 2000 continued its 2018 outperformance, rallying 0.58% on the week.

President Trump capped a week-long trip to Europe on Monday by meeting with Russian president Vladimir Putin in Helsinki, Finland. The leaders met for roughly four hours discussing, according to them, a wide range of topics including arms control, the future of Syria, and, of course, Russian interference in the 2016 U.S. election, which Mr. Putin again strongly denied.

Mr. Trump caused a bit of a stir for appearing to reject his own intelligence agencies’ conclusion that Russia meddled in the election in favor of Mr. Putin’s plea of innocence. President Trump later clarified his remarks, replacing the word would with wouldn’t in the following statement referring to Russian interference: “I don’t see any reason why it would be them.”

On to U.S.-China trade relations, NEC Director Larry Kudlow said on Wednesday that he believes some lower-ranking Chinese officials would like to reach a trade deal, but Chinese President Xi is refusing to compromise. China’s foreign ministry responded to Mr. Kudlow’s comment, calling it “shocking” and “bogus.”

On Thursday President Trump did an exclusive interview with CNBC in which he directly criticized the Fed, saying he’s “not thrilled” about the interest rate hikes, and said he is willing to slap tariffs on $500 billion worth of Chinese goods if necessary. He also commented on the strengthening dollar, saying it puts the U.S. at an unfair disadvantage.

U.S. government bond prices fell Friday after President Donald Trump wrote on Twitter that China and the European Union “have been manipulating their currencies and interest rates lower” as uncertainty about the economic status quo appeared to weigh on investor sentiment.

The yield on the benchmark 10-year Treasury was 2.895% on Friday, compared with 2.845% Thursday, representing the largest one-day increase in more than six weeks. The yield on the two-year Treasury, typically more sensitive to changes in expectations for Fed policy, was 2.599%, up from 2.593%. Yields rise as bond prices fall.

Mr. Trump’s comments on the Fed were particularly controversial as presidents have typically refrained from speaking on monetary policy in an effort to protect the Fed’s independence. The White House issued a follow-up statement after the CNBC clip aired on Thursday, clarifying that Mr. Trump respects the Fed’s independence.

On a separate, but related note, Fed Chair Jerome Powell gave Congress his semiannual update on the economy and monetary policy, speaking before both the Senate Banking Committee and the House Financial Services Committee. Mr. Powell’s testimony provided no new information; he simply reinforced the view that improving economic conditions should allow the Fed to continue hiking rates gradually.

Things weren’t just hot in Washington, the second quarter earnings season heated up last week as well with several influential names reporting their latest results. Netflix, which has been on a real tear this year, dropped sharply on Tuesday after the streaming media company missed subscriber growth estimates.

Microsoft, IBM, and eBay also reported their quarterly results last week. Microsoft and IBM rallied after beating earnings estimates, but eBay fell after reporting below consensus results. The top-weighted technology sector finished last week with a gain of 0.1%, extending its yearly advance to 15.4%.

Financial giants Bank of America, Goldman Sachs, and Morgan Stanley reported earnings last week, topping estimates. The positive results helped the heavily-weighted financial sector climb 2.2% and finish atop the week’s sector standings.

In other corporate news, Comcast said it will not counter Disney’s offer for 21st Century Fox’s entertainment assets, and Amazon held its annual Prime Day, saying the 36-hour special was its biggest shopping event ever despite having to deal with some technical glitches.

Energy was the worst-performing sector last week, losing 1.9%, as crude oil extended the previous week’s tumble. WTI crude futures dropped 3.9% to $68.23 a barrel and are now 8.0% below the nearly three and a half year high they’ve touched several times this month. Fears that the U.S. may give some countries waivers to continue buying oil from Iran was one of several factors weighing on the crude market

July 23 – July 27 Economic Calendar

  • Monday
  • Chicago Fed National Activity Index
    8:30 AM ET
  • Existing Home Sales
    10:00 AM ET
  • PMI Composite Flash
    9:45 AM ET
  • Richmond Fed Manufacturing Index
    10:00 AM ET
  • Wholesale Inventories [Advance]
    8:30 AM ET
  • Bloomberg Consumer Comfort Index
    9:45 AM ET
  • EIA Natural Gas Report
    10:30 AM ET
  • Kansas City Fed Manufacturing Index
    11:00 AM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Tuesday
  • Redbook
    8:55 AM ET

  • FHFA House Price Index
    9:00 AM ET
  • PMI Composite Flash
    9:45 AM ET
  • Richmond Fed Manufacturing Index
    10:00 AM ET
  • Wholesale Inventories [Advance]
    8:30 AM ET
  • Bloomberg Consumer Comfort Index
    9:45 AM ET
  • EIA Natural Gas Report
    10:30 AM ET
  • Kansas City Fed Manufacturing Index
    11:00 AM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Wednesday
  • MBA Mortgage Applications
    7:00 AM ET
  • New Home Sales
    10:00 AM ET
  • EIA Petroleum Status Report
    10:30 AM ET
  • Richmond Fed Manufacturing Index
    10:00 AM ET
  • Wholesale Inventories [Advance]
    8:30 AM ET
  • Bloomberg Consumer Comfort Index
    9:45 AM ET
  • EIA Natural Gas Report
    10:30 AM ET
  • Kansas City Fed Manufacturing Index
    11:00 AM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Thursday
  • Durable Goods Orders
    8:30 AM ET

  • International Trade in Goods
    8:30 AM ET
  • Jobless Claims
    8:30 AM ET
  • Retail Inventories [Advance]
    8:30 AM ET
  • Wholesale Inventories [Advance]
    8:30 AM ET
  • Bloomberg Consumer Comfort Index
    9:45 AM ET
  • EIA Natural Gas Report
    10:30 AM ET
  • Kansas City Fed Manufacturing Index
    11:00 AM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Friday
  • GDP
    8:30 AM ET

  • Consumer Sentiment
    10:00 AM ET
  • Baker-Hughes Rig Count
    1:00 PM ET
  • Richmond Fed Manufacturing Index
    10:00 AM ET
  • Wholesale Inventories [Advance]
    8:30 AM ET
  • Bloomberg Consumer Comfort Index
    9:45 AM ET
  • EIA Natural Gas Report
    10:30 AM ET
  • Kansas City Fed Manufacturing Index
    11:00 AM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET

PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. This market commentary is a matter of opinion and is for informational purposes only.  It is not intended as investment advice and does not address or account for individual investor circumstances.  Investment decisions should always be made based on the client’s specific financial needs, goals and objectives, time horizon and risk tolerance.  The statements contained herein are based solely upon the opinions of Telemus Capital, LLC.  All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice. Information was obtained from third party sources, which we believe to be reliable, but not guaranteed.