Trade continued to dominate the news last week and cause market volatility as investors monitored discussions of the North American Free Trade Agreement (NAFTA) and tension with China. While Mexico and the U.S. reached a new trade deal early in the week, talks with Canada stalled on Friday, August 31. Reports also came out that President Trump may be adding tariffs on another $200 billion in Chinese goods. Domestic markets increased for the week and ended August in positive territory.
Although trade might have dominated headlines, last week provided a number of informative economic updates, including:
• Personal incomes grew in July.
The 0.3% increase fell slightly short of the projected growth but is still up 4.7% since this time last year. Combined with growth in personal consumption, this data indicates that consumers had a solid start to the 3rd quarter of 2018.
• Gross Domestic Product (GDP) was higher than initially thought.
The 2nd reading of GDP expansion between April and June was 4.2%, higher than the initial reading and still the fastest economic expansion since 2014. Economists don’t believe this pace is sustainable, however, as rising interest rates, ongoing trade tension, and fading tax-cut benefits could slow growth later in the year. The rolling 12 month average is just a hair above 3%.
• Consumer confidence soared in August.
The latest consumer confidence data came in higher than it has since October 2000. This strong reading may indicate that consumer spending will remain healthy for now. Since consumer spending is more than ⅔ of the U.S. economy, its growth is a critical factor to track.
Last week’s performance and reports once again underscore a message I have frequently shared with you: Instead of focusing on the headlines, pay attention to the fundamentals for a clearer understanding of the economy. If you have questions about how this data affects your financial life, I’m here to talk.
One headline you're bound to hear tonight is Amazon reached $1 trillion in market capitalization today. While newsworthy because of the figure, it doesn't really mean a whole lot. I keep a sign on my desk that reads: "Historically somebody would have said days like this and numbers like this are like crossing state lines with kids. They get so excited for five minutes and then they ask, where is the next McDonald's? I would not consider it an indicator of any real substance or significance." Most headlines, good and bad, are noise. Learning to filter it out is at the essence of successful investing.
Monday: U.S. Markets - Closed for Labor Day Holiday
Tuesday: PMI Manufacturing Index, ISM Mfg Index, Construction Spending
Wednesday: Motor Vehicle Sales, International Trade
Thursday: ADP Employment Report, Factory Orders, ISM Non-Mfg Index, Jobless Claims
Friday: Employment Situation
This day in history:
On this day in 1998, search engine firm Google, co-founded by Larry Page and Sergey Brin, who met at Stanford University, files for incorporation in California.
Quote of the week:
“Money is usually attracted, not pursued.”
— Jim Rohn
PUBLISHED BY NICK TOADVINE