Telemus Weekly Market Review

September 17 – September 21, 2018

The markets mostly continued in rally mode last week with investors shrugging off the imposition of another round of U.S. tariffs on Chinese goods. The S&P 500 and the Dow touched new records, the first time that’s happened to the Dow since January 26th, and finished the week with respective gains of 0.85% and 2.25%. The Nasdaq lagged however, slipping 0.29% for the week.

Monday evening President Trump announced the U.S. will be placing tariffs on $200 billion worth of Chinese goods starting on September 24th. The tariff rate will start at 10%, but will increase to 25% on January 1st. The president also said he will impose additional tariffs on $267 billion worth of Chinese goods if Beijing retaliates , which it vowed to do with 5%-10% tariffs on $60 billion worth of U.S. goods.

Stocks surprisingly took off on Tuesday following the tariff announcement, with some analysts pointing to the fact that the initial 10% tariff rate by the U.S. was not as harsh as expected thereby reflecting a willingness to negotiate. Others said the rally reflected the market’s belief that the U.S.-China trade dispute will eventually die down. Short-covering activity likely helped as well.

The heavily weighted and interest rate sensitive financial sector was among the top performing groups last week with a gain of 2.3%, benefiting from a steepening of the yield curve. The yield on the benchmark 10-yr Treasury note climbed seven basis points to end Friday at 3.07%, while the Fed-sensitive 2-yr yield jumped two basis points to 2.81%.

Conversely, the top weighted information technology sector underperformed last week, getting surpassed by consumer discretionary for the top spot in the 2018 sector standings race. The two groups hold year to date gains of 18.5% and 18.7%, respectively.

In total, eight of the eleven S&P sectors finished last week in the green, with cyclical sectors showing relative strength. A new sector, communication services, was born after Friday’s close, and it will involve reclassifying several widely held technology, telecom, and media stocks into the new sector including Facebook, Alphabet, Verizon, Netflix, and Walt Disney.

In individual stocks, cannabis names were in focus last week. Tilray, the Canadian cannabis company, went on a wild ride after its CEO suggested that his business would be a “smart hedge” for major pharmaceutical companies. Tilray shares traded as high as $299.46 a share, 175% above the previous Friday’s close, before ending the week at $123.00 a share.

WTI crude climbed 2.6% last week to $70.77 a barrel even though President Trump criticized OPEC on Thursday morning, tweeting the “OPEC monopoly must get [oil] prices down now!” Reuters then reported on Friday that OPEC and non-OPEC countries are discussing the possibility of raising output by 500,000 barrels a day to counter falling supply from Iran due to U.S. sanctions.

Looking ahead to this week, the Federal Reserve will release its latest policy directive on Wednesday afternoon. The markets are all but certain that they will hike rates with the CME FedWatch Tool placing the chances at 100% so investors will be more focused on the Fed’s rate forecast, especially for 2019.

September 24 – September 28 Economic Calendar

  • Monday
  • Chicago Fed National Activity Index
    8:30 AM ET
  • Dallas Fed Mfg Survey
    10:30 AM ET
  • FHFA House Price Index
    9:00 AM ET
  • Consumer Confidence
    10:00 AM ET
  • Richmond Fed Manufacturing Index
    10:00 AM ET
  • State Street Investor Confidence Index
    10:00 AM ET
  • Wholesale Inventories [Advance]
    8:30 AM ET
  • Pending Home Sales Index
    10:00 AM ET
  • EIA Natural Gas Report
    10:30 AM ET
  • Kansas City Fed Manufacturing Index
    11:00 AM ET
  • Farm Prices
    3:00 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Tuesday
  • Redbook
    8:55 AM ET

  • S&P Corelogic Case-Shiller HPI
    9:00 AM ET

  • FHFA House Price Index
    9:00 AM ET
  • Consumer Confidence
    10:00 AM ET
  • Richmond Fed Manufacturing Index
    10:00 AM ET
  • State Street Investor Confidence Index
    10:00 AM ET
  • Wholesale Inventories [Advance]
    8:30 AM ET
  • Pending Home Sales Index
    10:00 AM ET
  • EIA Natural Gas Report
    10:30 AM ET
  • Kansas City Fed Manufacturing Index
    11:00 AM ET
  • Farm Prices
    3:00 PM 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
  • FOMC Meeting Announcement
    2:00 PM ET
  • FOMC Forecasts
    2:00 PM ET
  • Fed Chair Press Conference
    2:30 PM ET
  • Wholesale Inventories [Advance]
    8:30 AM ET
  • Pending Home Sales Index
    10:00 AM ET
  • EIA Natural Gas Report
    10:30 AM ET
  • Kansas City Fed Manufacturing Index
    11:00 AM ET
  • Farm Prices
    3:00 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Thursday
  • Durable Goods Orders
    8:30 AM ET

  • GDP
    8:30 AM ET
  • International Trade in Goods
    8:30 AM ET
  • Jobless Claims
    8:30 AM ET
  • Corporate Profits
    8:30 AM ET
  • Retail Inventories [Advance]
    8:30 AM ET
  • Wholesale Inventories [Advance]
    8:30 AM ET
  • Pending Home Sales Index
    10:00 AM ET
  • EIA Natural Gas Report
    10:30 AM ET
  • Kansas City Fed Manufacturing Index
    11:00 AM ET
  • Farm Prices
    3:00 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Friday
  • Personal Income and Outlays
    8:30 AM ET

  • Chicago PMI
    9:45 AM ET
  • Consumer Sentiment
    10:00 AM ET
  • Baker-Hughes Rig Count
    1:00 PM ET
  • John Williams Speaks
    4:45 PM ET
  • State Street Investor Confidence Index
    10:00 AM ET
  • Wholesale Inventories [Advance]
    8:30 AM ET
  • Pending Home Sales Index
    10:00 AM ET
  • EIA Natural Gas Report
    10:30 AM ET
  • Kansas City Fed Manufacturing Index
    11:00 AM ET
  • Farm Prices
    3:00 PM 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.