Weekly Market Commentary

August 20, 2018

 

The Markets

Missed it by THAT much! After a rocky start, the Standard & Poor’s 500 Index came within 1 percent of an all-time high last week. It’s significant because the Standard & Poor’s 500 Index has been trading below its January record all year.

Would you believe…the President asked for it? President Trump on Friday asked regulators to review a decades-old requirement that public companies release earnings quarterly, a change some executives support to promote longer-term planning but that some worry could reduce market transparency. While transparency is essential to investors, critics suggest quarterly reporting distracts companies from focusing on longer-term financial and strategic goals.

Remember that saying about the forest and the trees? Some pretty good numbers have been posted for 2018. They’re the type of numbers that inspire confidence. For example:

4.1 percent. The United States experienced strong economic growth during the second quarter. The advance estimate for U.S. gross domestic product (the value of all goods and services produced by a nation) during the second quarter of 2018 was 4.1 percent. That was the highest rate of growth since the first quarter of 2014.

24.6 percent. 2017’s tax reform, which lowered corporate tax rates from an average of 35 percent to an average 21 percent, boosted corporate earnings, reported Nasdaq.com. With 91 percent of companies reporting in, the blended earnings growth rate for the S&P 500 was 24.6 percent during the second quarter of 2018.

$1 trillion. What are companies doing with their tax windfall? U.S. companies are rewarding shareholders by buying back stock, reported Nasdaq.com, which suggested buybacks could total $1 trillion in 2018.

3,453 days. Depending on how precisely you define the last bull market, August 22 may be the day that marks this one as the longest bull market in history.

While positive economic and market numbers are nice to see, they are trees in a forest and don’t necessarily provide a full or an accurate picture. For instance, the length of a bull market is interesting, but it has no predictive value. The length of the current economic expansion is far more important.

 

Focus on The Positive

“If you put the government in charge of the Sahara Desert, in five years, there’d be a shortage of sand.” -Milton Friedman