April 16, 2018 – Weekly Market Commentary


Chinese flag - waterloo weekly market commentary

Kevin Yao and Elias Glenn – Reuters
China’s Xi Renews Vow to Open Economy, Cut Tariffs as U.S. Trade Row DeepensSummary: Chinese President Xi Jinping promised on Tuesday to open the country’s economy further and lower import tariffs on products like cars. The speech was seen as an attempt to defuse an escalating trade dispute with the US. Global stock markets reacted positively to the news and comments by both Xi Jinping and President Trump which indicate that a full-scale trade war can be averted.

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US Producer Prices Rose More Than Expected in MarchSummary: US producer prices rose more than expected in March, supporting the view that inflation will continue to trend higher this year. Core PPI has increased 2.9% over the last 12 months which is the largest increase since 2014. The data will likely keep the Fed on track to raise rates again at their next policy meeting. 

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All Fed Members See Higher GDP and Inflation This YearSummary: Federal Reserve officials expect the economy to continue expanding and inflation to continue rising this year. Looking ahead to their next meeting, members expected that they will continue to support raising interest rates at the current projected pace of 0.25% per hike.  

John Butters – Factset
S&P 500 Likely to Report Earnings Growth of 20% for Q1Summary: S&P 500 earnings are estimated at 17.3% for Q1 2018. Data from Factset shows that on average, actual reported earnings have exceeded estimated earnings by 4.3% which has resulted in an earnings growth rate that has typically outpaced estimates by 3%. Applying that trend to Q1 earnings would put S&P 500 earnings growth at 20.1% which would be the highest earnings growth since 2010.

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Liz Ann Sonders, Jeffrey Kleintop, Brad Sorensen – Charles Schwab
Keeping Things in PerspectiveSummary: With trade war fears beginning to fade the Schwab team expects that economic data and earnings will be a focal point for investors. Many economic indicators tend to rebound following slower Q1 data, and earnings expectations have remained elevated. For investors that think military action in the Middle East, the Schwab team points out that historical market reactions to missile strikes have been short-lived and quickly overcome. 

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Russ Koesterich, CFA – BlackRock
Why US Stocks May Still Not Be “Cheap Enough”Summary: Trade war fears have increased market volatility, but they could also impact the growth outlook for the US. Rising inflation and the potential for a decline in capital spending could lead to a contraction in earnings later this year. Without significant earnings growth, US stocks still look expensive versus foreign developed markets. Because of this foreign equities potentially provide more upside to investors.





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