Weekly market update

First, I want you to know it is not my intent to bash our President and this is not a political statement, but the tweet is mightier than the sword—once again. On Friday, President Trump sent a tirade of tweets aimed at China after they retaliated with their own tariffs on U.S. goods. He said America would probably be better off without them, said we would destroy China and “ordered” U.S. companies to look for alternatives to doing business with China. The result, the major averages fell more than 2% on the day.

We were headed to a nice quiet Friday afternoon close and stocks were on their way to have their first positive week in a month, yet it wasn’t meant to be. The Dow finished the week down 0.98%, the S&P 500 down 1.42% and the tech-heavy NASDAQ finished down 1.81%.

And to think, all eyes were supposed to be focused on The FED’s Jackson Hole symposium. That series of tweets completely over-shadowed FED Chair Powell’s speech.

Was it the worst day ever for FED Chair Powell? First, he goes full-on dovish in his speech about the economy and monetary policy, but the President wants to crucify him because he wasn’t dovish enough and he questioned whether Powell or China’s Xi was the biggest enemy of the U.S.

Let’s set the record straight—we are not in any type of market cycle or economic cycle, once again—we are in the chaos cycle:

-Powell speaks

-Trump tweets

-China reacts

-Markets freak

Rinse and repeat.

We did have three pieces of good economic news last week—we hit a new cycle high for the Leading Economic Indicators, we hit a new cycle high for new home sales and the 4-week moving average on unemployment claims is still at cycle lows.

The problem seems to lie in manufacturing. Manufacturing PMI numbers show we are in contraction—a reading below 50 and the lowest reading in 10 years. One regional FED report last week showed the Kansas City region fell further into negative territory, posting a -6, down from -1.

We have heard a lot about the state of bricks and mortar retail sales and most of it has been bad, but there are pockets of retail strength that do exist. Walmart, Target, Lowes, Home Depot, La-Z-Boy all just blew the doors off it. Tariffs, sure they could have some impact, but right now they’re firing on all cylinders.

This week we will close the books on a pretty eventful August. August has been only the second down month of 2019—and it could have been much worse—but we aren’t finished yet. As of this writing, stocks are jumping on—you guessed it—a series of tweets and comments from President Trump saying that China is ready to come to the table and China’s Xi is a great leader. So, in the 3 days, Xi has gone from one of the biggest enemies of the U.S. to a “great leader”. I would have to say this has become the most difficult trading environment in memorable history. This week we’ll buckle up for what looks to be another volatile week of trading. Stay tuned and we’ll keep you posted.

Todd Day, MBA
Portfolio Manager
Horizon Financial Services, LLC
August 26, 2019

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