Weekly Market Update

Author : Laura Hochstetler
Date : August 4, 2018

Market Action

The major US stock market benchmarks closed slightly positive for the week, while ex-US equities declined modestly on the week. The yield of the benchmark 10-year Treasury note was little changed for the week, ending at 2.95% after having stalled near 3% earlier in the week. Prices for US and international benchmark crude-oil futures registered a loss for a fourth week in five as data continue to point to rising global production.

With 80% of the constituents of the S&P 500 Index having reported, the blended earnings growth rate stands at 24% and revenue growth stands at 9.8%. Those figures are running very close to the rates posted in first quarter, namely 24.8% EPS growth and 8.5% revenue growth. Do such sustained high earnings levels signify a late cycle environment which merits caution, or a bright outlook for ongoing growth at least in the near future?

The Bank of England raised its benchmark interest rate for only the second time in a decade, amid concern about inflation and potential for an economic downturn as Britain exits the European Union. The Bank of Japan declared a more flexible approach to controlling the Japanese Government Bond yield curve, allowing 20-basis-point fluctuations versus the previous 10-basis-point band, in an effort to make the policy more sustainable.

Calling it expensive and unsustainable, Ontario’s new government is scrapping the province’s basic income pilot, which began in April 2017 and was set to last three years. The decision brings an end to North America’s first government-backed trial of the idea in decades following a move by Finland to terminate Europe’s first government-backed basic income experiment.

The Trump administration announced this week that it may raise the tariff rate on $200 billion in proposed levies on Chinese exports to 25% from the previously contemplated 10% rate. On Friday China said it will levy tariffs on $60 billion of US products if the US moves ahead with this plan.

Iranian lawmakers have given President Hassan Rouhani one month to appear before parliament to answer questions on his government’s handling of Iran’s economic difficulties. Topics include the rial’s decline, which has lost more than half its value since April, weak economic growth and rising unemployment. Rouhani appointed a new central bank governor last week, suggesting that he’s conceding a need for reshuffling his economic team.

Please click here for this week’s update on market returns.