Weekly Market Updates
Week Ending March 8
As many of you know we like to check in with Brian Wesbury, Chief Economist at First Trust Portfolios from time to time for a bird’s eye view on the global economy. Given last week’s lack luster run in equity markets we felt now was a good time in lieu of our standard summary. And while we don’t always agree with all he has to say this serves as a nice update as to current conditions roughly 2/3rds of the way through Q1:
Week Ending March 1
Stocks were marginally higher during a up and down week as investors weighed better-than-expected economic growth with geopolitical and trade concerns. GDP grew at 2.6% in the 4th quarter, beating consensus expectations of 2.2%, as business investment remained strong. In trade news, President Trump announced a delay to an increase in tariff rates and his top trade negotiator, Robert Flightier, later in the week told reporters the U.S. is in the process of abandoning plans to increase rates on $200 billion of Chinese goods to 25% from 10% due to progress on a deal. Looking ahead, corporate profits are likely to be challenged next quarter as falling energy prices, weak earnings guidance for some mega-cap firms and less benefits from tax cuts could lead to declining earnings growth for the S&P 500.
Long-dated U.S. Treasury yields declined early in the week as investors favored government paper amid weak housing data and Federal Reserve Chairman Jerome Powell's testimony to Congress. Housing starts declined 11.2% in December and are down 10.9% versus a year ago, the slowest pace of activity in two years. Fed Chairman Jerome Powell reiterated the Federal Open Market Committee's patient stance on future interest rate changes.
Week Ending February 22
US equity markets were closed last Monday in observation of the federal holiday Presidents' Day. United States President Donald Trump and Chinese Vice Premier Liu He met in Washington last Friday and into the weekend for the ongoing trade talks. President Trump announced that the March 1 deadline for a trade agreement could be extended a month to prevent higher American tariffs from starting. Both the President and the Vice Premier gave optimistic comments on a likely future trade deal.
Treasury prices were relatively unchanged over the course of the week as investors weighed the minutes from the Federal Reserve meeting and kept an eye on U.S.-China trade talks. The Fed minutes on Wednesday showed some disagreement among the officials about rate hikes as some thought increases would be necessary if inflation were higher than forecasted while others thought strong economic activity would be expected. This did not change the expectation of a low chance of a rate hike this year, especially after most officials were in favor of ending the unwinding of the Fed's balance sheet in 2019. Trade talks commenced this week with a report that an outline for a deal was being worked on and that President Trump's stance on the March 1st deadline for raising tariffs appeared to soften.