Faceplant | March 23, 2018

Facebook caused chaos on the Markets early in the week, followed by a rate hike, and tariff talk closed out the week. What does it all mean to the outlook for US equities?

At the opening of the week, Facebook (FB) was the center of attention. It lost 13.88% as concerns were brought to light over a 50 million user information breach that occurred. It continued to fester as questions were raised about the use of the data, the potential of a congressional appearance, and prompted an apology from Mark Zuckerberg.

The Markets seemed to calm down as we moved toward mid-week when the focus shifted to the Federal Reserve Board (FRB) and their interest rate decision. While they did increase rates by .25% as widely expected, they did not expand their projections for hikes for the remainder of the year. Lastly, they increased the number of hikes likely in 2019 and 2020.

The later part of the week was dominated by presidential news of tariffs against, and by, China. A set of tariffs were announced against China that could carry implications for $50 Billion worth of imports per year. The target is goods that seek to undercut and violate copyrights by US companies. The impact will not be immediate as there is a period of determination, where companies can request exemptions. In retaliation, China said they were going to take similar action against $3 Billion worth of US Goods on an annual basis.

The net outcome was a week we could have all done without:  Equities sold off nearly 6% and are down a little over 3% for the year; interest rates have fallen from their highs as investors seek safe havens from the current uncertainty; and tariffs present risks to the economy as they will accelerate inflation and increase costs for companies in the long run. In the near-term, however, we still have corporate tax savings to look forward to for 1st quarter earnings!

 

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