Your Market Update:
- Domestic equity markets go negative
- Treasuries and Gold rally
- Retail earnings report disappoint
- Solid Q2 earnings season wrapping up
Domestic equity markets were down across the board for the week on geo-political saber rattling and mixed earnings results. Tensions between North Korea and the U.S. was at least partially responsible for Treasury bonds appreciating and Gold rallying on the week. All three major equity indices were off over 1%. Several brick and mortar retailers reported earnings late in the week; both revenues and guidance continue to deteriorate. Keep in mind next week is dominated by more earnings releases from retailers.
On the economic front, the Consumer Price Index (CPI) for July was released and continues to indicate no meaningful pick-up in inflation. This weighed on Treasury yields as well as the 10-year Treasury closed below 2.20% and remains at the low end of its recent trading range. The continued subdued trend in inflation brings in to question whether the Fed will raise rates once again this year.
Was this past week the beginning of a well anticipated downward trend for equities? Per analysis by Alliance Bernstein that appeared in Saturday’s Wall Street Journal it has been more than a year since the last 5% downdraft in stocks and more than 76 weeks since the stock market suffered a 10% loss. Going back to 1928 the respective averages are 10 weeks and 33 weeks. So, on average the equity markets are overdue for a pullback, that said a week’s performance doesn’t make a trend. We will follow up with a more in depth look at intra year declines in the S&P 500 in the next couple of weeks.Within a larger context the Q2 earnings season is concluding and it has been solid. Per FactSet 91% of companies in the S&P 500 have reported through last Friday. Earnings growth has come in at 10.2% on a year over year basis exceeding high single digit expectations. 73% of companies reporting have beat expectations which is normal. S&P companies with more global exposure have reported higher earnings growth which may be tied to the decline in the dollar.
Earnings releases next week continue to be dominated by retailers:
Monday – Sysco
Tuesday – Advanced Auto Parts, Coach, Dick’s Sporting Goods, and Home Depot
Wednesday – Target
Thursday – Alibaba
Friday – Deere, Estee Lauder, and Foot Locker
Indices for the week and YTD are as follows:
S & P 500 down 1.43% for the week; YTD index return is 9.04%
NASDAQ Composite down 1.50% for the week; YTD index return is 16.23%
Dow Jones Industrial Average down 1.06% for the week; YTD index return is 10.60%
Benchmark 10-year Treasury bond yield stands at 2.19% down 7 basis points for the week.
Chris McGee heads Caldwell’s investment committee, which draws on a team of experienced in-house professionals and carefully chosen outside analysts to make decisions for client portfolios.
A Chartered Financial Analyst (CFA) and Chartered Alternative Investment Analyst (CAIA), McGee had previously been senior investment adviser and senior vice president at PNC Wealth Management in Sarasota for nearly a decade. Prior to that he was portfolio manager for five years with U.S. Trust (formerly Bank of America) in Sarasota. Before relocating here, he had served as vice president, capital management, for Wachovia Bank in Winston-Salem, North Carolina.
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About Caldwell Trust Company
Caldwell Trust Company is an independent trust company with offices in Venice and Sarasota, Florida. Established in 1993, the firm currently has nearly $1 billion dollars in assets under management for clients throughout the United States. The company offers a full range of fiduciary services to individuals including services as trustee, custodian, investment adviser, financial manager and personal representative. Additionally, Caldwell manages 401(k) and 403(b) qualified retirement plans for employers.
