May 29, 2018

Weekly Market Commentary
May 29, 2018

The Markets

Geopolitical uncertainty didn’t dent U.S. stocks last week, but it did cause some global turmoil.

Geopolitics is the intersection of geography, economics, and politics and last week there were some fine examples of the ways geopolitical events can create uncertainty.

President Donald Trump began the week suggesting that a trade war with China was on hold, before later ordering his administration to explore penalties on imported automobiles. The president also canceled talks with North Korea. Italy’s bond market melted down following the emergence of a Euroskeptic government, while Turkey’s lira tumbled over concerns that President Tayyip Erdogan would take control of its central bank.

Uncertainty caused major indices across Europe to finish lower during the week. A majority of Asian-Pacific indices moved south, too, as did Canadian and Mexican indices. Despite pessimism elsewhere, investors in the United States remained unfazed and major U.S. stock market indices finished the week higher. The Standard & Poor’s (S&P) 500 Index was up 0.3 percent.

The strong performance of U.S. markets last week was remarkable because the S&P 500 moved higher on news that would seem to inspire uncertainty. It was also remarkable because U.S. stocks gained less when S&P 500 companies reported first quarter profits were better than expected.

First quarter’s earnings season – when companies report how profitable they were during the first quarter – is almost over. A majority of S&P 500 companies did better than expected, according to FactSet. However, companies with stronger than expected earnings saw share prices only increase 0.2 percent on average, less than share prices increased the week before. As of 05/28/2018 the S&P is only up 1.8% even though earnings have done well in the overall market and unemployment is low.

WORKING OUT THE BUGS. There was a lot of news about new inventions last week. Some devices appear to have potential while others have been delivering unexpected results. Take a look at recent innovation news:

• Droning on. Remember the vehicles Galactic storm troopers rode into battle against the Ewoks in Star Wars? They’re now available on Earth. Hover bikes look a lot like a super-sized drone that can carry a person. They can travel up to 13 miles or 20 minutes, at speeds up to 43 miles an hour, before recharging is needed.

• Shhh. It’s listening. Smart speakers made the news last week after it was widely reported that one had recorded a family’s conversation and sent it to someone on their contact list. A writer for MIT Technology Review investigated further, checking her smart speaker history. She found:

“…in the past several months it has also tuned in, frequently several times a day, for no obvious reason. It’s heard me complain to my dad about something work-related, chide my toddler about eating dinner, and talk to my husband – the kinds of normal, everyday things you say at home when you think no one else is listening.”

• Diagnosed by math. There’s a new algorithm in town. The U.S. Food and Drug Administration (FDA) just gave the thumbs-up to artificial intelligence that helps surgeons detect wrist fractures, reported MIT Technology Review. In fact, the FDA is “writing new rules to speed up approvals for AI-based devices and tools.”

• Folding wingtips. It seems like poor design, but some planes’ wingspans are too wide for standard airport gates. Instead of asking airports to build special gates, the Federal Aviation Administration approved folding wingtips on Friday.

We know change is constant. Adapting to change is the challenge.

Focus On The Positive

“Our flag does not fly because the wind moves it. It flies with the last breath of each soldier who died protecting it.”
–Unknown