The broad based S&P 500 gained, while emerging markets, the Dow 30 industrials and developed international stocks had the biggest gains. The Nasdaq 100 and the Russell 2000 (small cap index) ended the week with modest losses. The Trump administration announced that an additional $200BN worth of Chinese goods would be subject to 10% tariffs starting September 24th but said they could be increased to 25% in January and left the door open to adding another $256BN. China responded by applying 5-10% tariffs on $60BN worth of U.S. goods but exempted certain commodities such as energy. China also reduced tariffs from other countries to offset the higher prices from U.S. tariffs. Traders shrugged off fears of a broader trade war and were encouraged by the stepped approach rather in the full 25% right away and the more modest approach from China, 5-10% rather than a full 10%. Also encouraging was the intended continuation of talks between the U.S. and China. However, Oxford economics estimated that if all the threatened tariffs go into effect it would reduce U.S. gross domestic product by 1%. U.S. and Canadian trade talks seemed to have stalled this week.
The 10 year treasury yield rose primarily due to increased inflation expectations. The U.S. dollar weakened and commodities rose particularly crude oil as U.S. inventories have declined for five weeks now.
In the numbers this week:
- The National Association of Realtors reported that existing home sales were unchanged in August and are down 1.5% from a year earlier. Low inventory, higher home prices and higher mortgage rates were to blame.
- The Federal Reserve reported that household net worth rose nearly $2.2TN in the second quarter to $106.929TN.
- IHS Markit reported that its Purchasing Manager’s Index for Europe fell from 54.5 in August to 54.2 in September. Anything over 50 represents expansion, just at a slower acceleration. The decline was attributed to a decline in manufacturing exports.
- The World Bank issued a report that showed that extreme poverty in the world had dropped to 10% of the world population in 2015 and has estimated continued drops for the past three years. Over 25 years ending in 2015 extreme poverty fell from more than 1 billion people to 736 million people in 2015.
- The Commerce Department reported
- Housing starts rose 9.2% in August. Multifamily starts rose 29.3% while single family starts rose 1.9%. For the first eight months of 2018 housing starts rose 6.9%.
- The U.S. current account deficit fell to $101.46 in the second quarter from $121.71 in the first quarter. The current account deficit measures both trade and financial flows.
- The Labor department reported first time claims for unemployment fell 3,000 at a seasonally adjusted 201,000, a 49 year low. The four-week moving average of claims fell 2250 to a seasonally adjusted 205,750, the lowest since 1969 when the population was much smaller.
- The Energy Information Administration weekly report is here: wpsrsummary. Also, the EIA reported
- U.S. Crude oil production remained rose from 10.9MM barrels to 11.0MM barrels per day.
- Storage of natural gas rose 86BN cubic feet. Natural gas storage is below the minimum for this date during the past five years.
- According to Baker Hughes, In the past week the number of active oil rigs fell 1 to 866 and natural gas rigs were unchanged at 186.
Please call us if you have any questions.
Loren C. Rex, CFP®, AIF®, MA Erik A Smith
President Managing Partner
Generations Financial Planning & Wealth Management 269-441-4143
77 E. Michigan Ave, Suite 140
Battle Creek, MI 49017
Carrie Fuce, Assistant 269-441-4091
Toll Free: 800-513-8180
Visit our Website: www.genfinplan.com
Registered Representative of and securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Generations Financial Planning & Wealth Management are separate companies and are not affiliated.
These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. The Indices mentioned are unmanaged and cannot be invested into directly.