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AUTHOR: Jason J. Roque, CFP®, APMA®
TITLE: Investment Adviser Rep – CCO TAGS: Earnings, Trade, exports, Services |
Markets continued their growth trek last week with earnings, trade, and services in focus. Was it warranted, or is this a melt up?
Corporate Earning
Earnings season is just about over with 90% of companies reporting by the end of last week. The season began with expectations of a 4% fall in comparison to last year. While still negative, earnings so far have only fallen by 2.4%. The bad news is less than 50% of companies are beating revenue growth expectations, a poor indication of future growth.
Trade Talks
There was a glow over markets for most of the week regarding trade. As data trickled in it was mostly good news. Discussions were about where to sign a deal rather than what to sign. Additionally, markets improved on word from China that a roll back of current tariffs was in the ‘Phase One’ deal. Some of that excitement was tempered, however, when the White House refuted the claim.
Secondary Impact
Germany and Japan both advanced greater than China and The US on improved trade data. These two countries have been the largest extended victims of the US/China trade war. As export heavy nations, their reliance on global trade makes them susceptible to trade disputes.
Services Surprise
Services data, as measured by the ISM non-manufacturing PMI, impressed more than expected in October. As manufacturing continues to languish, services are being watched for a potential contagion effect across the US. Data improved from 52.6 to 54.7 in October, as an increase to 53.5 was expected. This improvement helps alleviate some concerns of a potential recession.
Conclusion
In all, the data from the week continued to support market strength as the S&P 500 touched new all-time highs. Signs of a potential melt up in equity assets do not appear to be occurring. Even M2 money supply points to potential future asset growth with $103B in expansion.
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