Weekly market update
Fears of a global trade war have spooked markets on-and-off since March, when President Donald Trump said his administration planned to slap tariffs on aluminum and steel imported into the U.S. Those levies have since been implemented against partners such as the European Union as well as against countries such as China, fanning the trade tensions. Despite those tensions, the major averages turned in a strong start to June.
Over the weekend, we learned news out of the G7 meetings in Canada—and it wasn’t good news. President Trump arrived late, left early and berated other world leaders on trade. This was not the way to resolve these trade disputes.
The Dow Jones Industrial Average finally broke above its May 21st resistance level and now large-cap stocks are playing a game of catch-up with the leadership in secondary issues and technology stocks.
Last week was a slow week on the economic front, but we did learn from the job openings and labor turnover (JOLTS) report that there are 6.6 million job openings in the U.S.—a record. We have more open jobs than we have unemployed Americans. We have a massive LABOR shortage…not a jobs shortage.
Other news on the economy—factory orders turned in a solid performance, but the headline number was distorted by a drop in aircraft orders.
Across the pond, we saw more evidence of a slowdown in economic data. German factory orders unexpectedly dropped for a fourth straight month. The last time orders fell four times in a row, the German economy slipped.
This week
The Trump/Kim summit highlights the week’s headlines and the markets would like to see something positive come out of it, but I don’t think the markets will sell off sharply if it doesn’t. We will also be focused on central banks as the FED meets and it is all but assured they will raise rates by 25 basis points, and we will be listening to their comments on the economy and more rate hikes. The European Central Bank and the Bank of Japan will also hold their monthly meetings. All eyes will be watching the ECB as it is expected they will start to discuss the end of their quantitative easing program.
On the economic front, inflation will be in focus as we get the CPI and PPI, and we will also get retail sales.
So—stay tuned and we’ll keep you posted.
Todd Day, Portfolio Manager
Horizon Financial Services, LLC
June 11, 2018
