Fisher Investments recaps the biggest market, political and economic news from last week, including US GDP growth, eurozone unemployment and an update on Brexit.
Global equities rose amid a slight de-escalation in US-China trade tensions. In the US, data were light. July durable goods orders increased 2.1% m/m, beating expectations. The second estimate of Q2 2019 GDP came in at 2.3% y/y, meeting estimates. With 493 of the 500 S&P 500 companies reporting Q2 2019 results, earnings are expected to contract 0.4% y/y, before re-accelerating in 2020. While fears surrounding the US-China “trade war” weighing on corporate profits are circulating, we think slowing earnings growth is to be expected in a mature economic expansion and does not preclude stocks from rising. For more information, please see our 08/29/2019 commentary, “A Summertime Check-In With Corporate America.” After the 2-year to 10-year US yield curve inverted last week, headline worries claimed a US recession is imminent. However, in our view, yield curve inversions aren’t a reliable market-timing tool. For more, please see our 08/26/2019 commentary, “Thoughts on Yield Curve Inversion.”
European economic data were also light. In the eurozone, July money supply (M3) grew 5.2% y/y. Preliminary August core consumer prices (excluding more volatile goods like food and energy) rose 0.9% y/y. The July unemployment rate remained at 7.5%, while loan growth came in at 3.4% y/y, beating estimates. In the UK, July money supply (M4) grew 2.7% y/y. In Brexit news, Prime Minister Boris Johnson exercised a rare move to limit Parliament’s time to debate any legislation ahead of the October 31, 2019 Brexit deadline. As a result, many different scenarios could materialize over the next few weeks—a general election, a Brexit deadline extension, a hard Brexit or a deal between the EU and UK—all challenging to predict. However, our view remains that any resolution to Brexit (other than more can-kicking) will ultimately benefit markets. For more information, please see our 08/28/2019 commentary, “Today in Brexit, Day 1,160.”
In Asia, Japan’s July unemployment rate was reported at just 2.2%, beating expectations. Preliminary July industrial production grew 0.7% y/y and July retail sales fell 2.3% m/m and
2.0% y/y, respectively.
The Week Ahead:
The US, eurozone, UK, China and Japan release manufacturing and services PMIs. The US reports August unemployment data. The eurozone posts Q2 2019 GDP growth and July retail sales, while the UK posts August retail sales. Japan posts July household spending.
Source for all data cited is FactSet. This update constitutes the general views of Fisher Investments and should not be regarded as personalized investment advice. No assurances are made we will continue to hold these views, which may change at any time based on new information, analysis or reconsideration. In addition, no assurances are made regarding the accuracy of any forecast made herein. Global equities are represented by the MSCI World Index. The MSCI World Index measures the performance of selected stocks in 23 developed countries and is presented net of dividend withholding taxes and uses the maximum rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. Past performance is no guarantee of future results. A risk of loss is involved with investments in stock markets.