April 30, 2018 – Weekly Market Commentary



 

Reuters logo - waterloo weekly market commentary

Christine Kim, Josh Smith – Reuters
Korean leaders Hold Historic Summit, but Pledges are Short on Detail

Summary: The leaders of North & South Korea held a historic meeting in which they pledged a complete denuclearization of the Korean peninsula. This was the first Korean summit in over a decade and the first time a North Korean leader set foot in the south since the 1950’s. Both countries indicated they would work with the U.S. and China moving forward to execute the promises. Despite the talks, details were lacking and some uncertainty still remains in regards to how both sides will proceed. 

 

Bank of Japan - waterloo weekly market commentary

Masayuki Yuda – Nikkei
BOJ Abandons Target Date for Achieving Inflation Goal

Summary: The Bank of Japan left monetary policy unchanged and removed its target date goal for achieving 2% inflation. BOJ Governor Haruhiko Kuroda said that including the forecast in communication with the markets was not appropriate because investors viewed the statement as a deadline instead of an estimate. Because investors often bet on central bank actions the BOJ believes that deleting the forecast will help keep markets stabilized around policy announcements. 

 

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CNBC
First Reading of Q1 GDP Shows 2.3% Growth

Summary: The US economy expanded at 2.3% during Q1 of this year. The slowdown from 2.9% in Q4 was due to waning consumer spending which grew at its slowest pace in five years. Economists expect growth to rebound in the second quarter as tax reforms free up capital for both individuals and businesses. 

 

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John Butters – FactSet
Midway Earnings Update

Summary: Through last week, 53% of companies in the S&P 500 had reported earnings. On average, companies have been reporting higher than expected earnings and beating estimates by more than 9%. All 11 major sectors are reporting year-over-year earnings growth and 9 sectors are reporting double-digit growth. Higher earnings and sideways stock price movements have pushed the S&P 500 forward P/E ratio down to 16.3, but the measure remains above the 5 and 10-year average. 

 

Charles Schwab Logo - waterloo Weekly Market Commentary

Liz Ann Sonders, Jeffrey Kleintop, Brad Sorensen – Charles Schwab
It’s Windy Out There

Summary: Stock markets are still trying to overcome the tug of war between positive fundamental news and negative external forces. The Schwab team believes that the secular bull market is still intact and that short-term selling pressures may be fading. Overall, positive economic trends and solid earnings remain supportive of further growth in stock prices despite elevated volatility levels. 

 

Blackstone Logo - Waterloo Weekly Market Commentary

Byron Wien – Blackstone
Triumphant Equity Returns Are Over 

Summary: Wien believes that there has been a shift in some fundamental factors that influence equity prices and that the economy may struggle to maintain momentum in coming years. Looking ahead Wien is concerned about rising Federal debt levels and declining demand for US government bonds leading to interest rates rising faster than expected. Higher rates and higher expenses for business inputs will eventually lead to less capital spending and consumer spending which will be a drag on future economic growth expectations. 

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