Market News – Week of April 9th, 2018

HAVE YOU “MADE IT”?:

A recent survey of Americans asked what “making it” in America meant to them, and that was compared to what they actually have.

• The average income of the respondents was $57,426, and yet they viewed $147,104 as “successful.”
• Ideally, respondents wanted a 31-hour work week, a 10-minute commute, and 5.3 weeks of time off. And they want to work from home.
• The ideal situation was to be married and have kids, and have four best friends.
• Success to the respondents meant owning a home worth $461,000 and a car worth $42,000.

Respondents were given five choices and asked where they would be spending their time if they “made it”. Here are the percentages:

• Enjoying friends and family 28%
• Exploring 23%
• Working 21%
• Relaxing 17%
• Helping people in need 11%

103,000 NEW JOBS:

The March employment report was disappointing in that only 103,000 new jobs were added to the economy. The unemployment rate stayed the same at 4.1% (six straight months at that mark). Job openings are at a record high at the moment (over six million), so it is likely that positive months will continue and that the unemployment rate will inch even lower. Wages in March were 2.7% higher than a year earlier, up from 2.6% the month before, so the tight labor market is causing employers to have to pay more. The Labor Force Participation Rate, which has been moving sideways for awhile, decreased to 62.9% (from 63.0%).

TRADE WAR FEARS SPARK BROAD SELLOFF:

U.S. markets were in the black for the week until trade war fears sparked another round of selling on Friday. The markets are moving through some turbulent volatility as a variety of fears continue to vex investors. The latest was a new round of worries about a trade war between the U.S. and China. On Friday, the spark came when Chinese Commerce Ministry spokesman Gao Feng stated that the two governments were now in a battle and that President Trump’s consideration of an additional $100 billion in tariffs on Chinese goods was “extremely wrong.” It appears that both countries are doing a lot of posturing, and it is not likely to stop any time soon. Boeing and Caterpillar, which sell a lot of product in China, both fell over 3% on Friday. All 11 major sectors of the S&P 500 were down on Friday. The S&P 500 has now had nine straight days where it has swung (up or down) at least 1%.

CORPORATE EARNINGS:

As March turns to April, it becomes not only the end of income tax filing season, but we start to see quarterly earnings reports come out. These reports not only state first quarter results, but future guidance. Most expect very healthy earnings reports which tend to help stock valuations. Of course, if these reports are disappointing compared to “expectations”, it could have the opposite effect. According to Thomson Reuters, S&P 500 profits are expected to rise by 18.4%, with about one third of that growth being attributed to the corporate tax cut. So far, of the 23 S&P 500 companies that have reported, 74% are reporting profits ahead of estimates. This week, JP Morgan, Blackrock, Citigroup and Wells Fargo will report, and sixty more companies will report the following week.

THE FED SAYS:

Last week, new Fed Chair gave his outlook for the U.S. economy.
“The labor market has been strong, and my colleagues and I on the Federal Open Market Committee (FOMC) expect it to remain strong.”
“[W]e expect [inflation] to move up in coming months and to stabilize around 2 percent over the medium term.”
“Our path of gradual rate increases is intended to balance these two risks.”

References:

THE FED SAYS: https://www.federalreserve.gov/newsevents/speech/powell20180406a.htm
103,000 NEW JOBS: http://www.calculatedriskblog.com/2018/04/march-employment-report-103000-jobs.html; https://www.marketwatch.com/story/job-openings-hit-record-high-at-start-of-2018-2018-01-09; https://www.marketwatch.com/story/job-openings-hit-record-high-at-start-of-2018-2018-01-09
TRADE WAR FEARS SPARK BROAD SELLOFF: https://www.wsj.com/articles/stocks-plummet-amid-rising-u-s-china-trade-tensions-1523056208?mod=searchresults&page=1&pos=2
CORPORATE EARNINGS:http://www.gulf-times.com/story/588069/High-stakes-high-expectations-as-US-earnings-season
HAVE YOU “MADE IT”?: http://www.visualcapitalist.com/quantifying-success/