U.S. CONSUMERS ARE BUYING: From June to July, retail sales in the U.S. jumped 0.5%. Sales last July were a full 6.4% higher than July of 2017. Robust hiring, low unemployment, and more take home pay are leading to more spending. Growth in retail sales was driven by sales at grocery stores, restaurants, department stores and clothing stores. Since much of that indicates spending on non-essential items, consumers do not seem to be worrying about higher gas prices and tariffs.
U.S. MARKETS REGAIN FOOTING AS TURKEY FEARS EBB A BIT: Although there is plenty of drama surrounding Turkey, and it will continue, fears that it will hurt the U.S. economy ebbed during the week as more and more analysts downplayed the risk of any troubles in Turkey being contagious enough to make our economy catch a cold. This coupled with solid U.S. corporate earnings reports boosted U.S. markets to a positive week. Walmart reported sales rising at the fastest pace in over a decade, which led to a 9% increase in its stock value on Thursday. Other big winners for the week were bellwethers Caterpillar, Century Aluminum, Boeing and Cisco Systems. Foreign stocks did not fare as well.
CHINA AND U.S. ANNOUNCE TALKS: China and the U.S. announced that lower-level trade talks will take place this coming week. Reports indicate that efforts are being made for potential November meetings between President Donald Trump and Chinese leader Xi Jinping. This isn’t much yet, but any sign of real progress on trade issues will boost markets.
ERA OF EASY MONEY FROM CENTRAL BANKS IS ENDING, MAYBE: The world’s four biggest central banks are the U.S. Federal Reserve, the European Central Bank, the Bank of Japan, and the Bank of England. These four institutions have pumped aboutt $13 trillion into the global economy since 2009. In 2019, it is expected that these central banks will actually take more cash out than they put in for the first time since 2011. Tens of billions of dollars, perhaps as high as $100 billion, will be removed from global liquidity next year. The central banks have, so far, turned this very large ship successfully. Can this continue without disrupting markets and economies as they shift from a year that is virtually break even for liquidity (2018) to a year when liquidity will begin to go in the opposite direction? We, and many, many others, will be watching this very closely.