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AUTHOR: Jason J. Roque, CFP®, APMA®
TITLE: Investment Adviser Rep – CCO TAGS: Trade, FRB, GDP, Brexit |
Markets climbed again last week. Does recent market strength translate into future growth and stability?
US/China Trade
China economic data out last week pointed to continued slowing growth. The good news is this should give the US more negotiating power, the bad news is a major economic engine is slowing. Hong Kong adds to the concerns coming out of China. The autonomous state of Hong Kong is being questioned. Its autonomy is vital to its participation in the global economy. A phase one deal is still expected, but the parameters of the deal are becoming less clear. Each side has asserted and refuted different claims on the deal.
Federal Reserve Bank (FRB)
The chair of the FRB, J. Powell, testified before congress last week. No not impeachment hearings… In his testimony he reiterated what he said in his post meeting press conference a few weeks ago. The US is on solid footing and no further cuts are expected, but the situation is evolving with new data.
German GDP
Germany narrowly avoided a recession last quarter (two consecutive quarters of negative GDP). Over the last four quarters they have reported -0.1%, 0.0%, -0.1%, and 0.1% (Q3 ’19). Economic growth in Germany, while improving, still has a long way to go to get to healthy. Business sentiment has improved tremendously, which is very encouraging.
Brexit
A conservative party success is expected at this point for the election on December 12th. This would be a vote of confidence for Prime Minister Johnson’s Brexit deal agreed to with the EU. Polling in the UK has been seldom accurate as of late, so more will be known on December 12th.
Conclusion
The calm of Brexit, quietness around US/China trade, and a fairly strong earnings season, carried markets higher this last week. As we move away from earnings season, headline risk could carry more weight in investor trading, which typically means volatility. 2020 still looks poised to benefit from positive earnings data and a resulting increase in corporate spending.
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