Rising Tides | April 13, 2018

The markets continued their volatile ways last week, but the S&P managed to muster a 1.99% increase. What caused the tide to change?

Trade this

It may be a bit premature to say that trade tensions with China are easing, however the markets welcomed a week where tensions did not escalate. President Xi Jinping showed a willingness late in the week to negotiate an amicable solution to the current trade tensions with the US. Also, likely to help the situation was the US sanctions against Russia which had a focus on aluminum production.

Buy That

Earnings season kicked off late last week. It is much anticipated and likely to be the strongest since 2011. The effects of the tax reform act passed last December will make it’s first impact to corporate balance sheets. The 14% tax cut is expected to send S&P 500 earnings above 17% for the quarter. While this is great news, it will be a tough act to follow first quarter next year.

Face Space

Mark Zuckerberg testified before congress last week. This was much anticipated as investors were looking to see how the Facebook CEO would respond to questions regarding their data breach. The questions were often poorly informed and mis-directed. Markets seemed satisfied with Zuckerberg’s performance, as Facebook stock staged a rally of nearly 7% during his two days of testimony.

Conclusion

Whether founded or not, many of the headwinds we have faced as an economy over the last two months shifted directions and became our tailwinds this last week. Earnings stand a great chance of causing this wave of optimism in investing to grow.

 

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