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Weekly Market Digest: Facebook Stock Plummets, Trade War Fears Ease Slightly

News of strong US Gross Domestic Product growth this week provided positive sentiment on the US Economy. Trade war fears also eased slightly on the back end of President Trump’s meeting with the EU Commission’s President Jean-Claude Juncker. Facebook stock plummeted nearly 20% this week, garnering international headlines. Earnings reports continued to roll out throughout the week and were largely positive, with earnings of more than one third of the companies in the S&P 500 Index reported.

Weekly Returns

S&P 500: 2819 (+0.6%)
FTSE All-World ex-US(VEU): (1.3%)
US 10 Year Treasury Yield: 2.95 (2.07%)
Gold: $1232 (+0.0%)
EUR/USD: 1.166 (-0.5%)

Major Events

  • Monday – Despite a $5 billion dollar fine imposed by the European Union in an Android antitrust case, Google’s earnings report resulted in over a 4% jump in share price.
  • Tuesday – Bitcoin, which was priced at over $16,000 in early January and subsequently fell more than 60% over subsequent months, climbed its way up to price above $8,000 this week.
  • Tuesday – White House announces a $12 billion aid package to US Farmers of certain commodities negatively impacted by escalating tariffs.
  • Wednesday – President Trump met with the European Union’s Executive Branch President Jean-Claude Juncker. Discussions surrounded reducing or eliminating some of the tariffs that have been imposed by the United States, with concessions from the EU on the table.
  • Thursday – Facebook’s stock price opened down nearly 20% from Wednesday’s record highs, on the news that their revenue growth did not meet expectations.
  • Friday – Commerce Department reports that the US Economy’s Gross domestic product grew at a 4.1% annualized rate in the second quarter of 2018. This is the strongest showing of quarterly growth since 2014.

Our Take

While there were many signs this week pointing to a strong US economy, housing sales data was not one of them. While housing overall is an area of strength in the US, home sales have been declining for the majority of 2018, with a number of other housing-related factors also slowing when compared to similar periods in past years. For more Real Estate commentary, see our Q2 Report.

The Trump Administration positioned President Trump’s meeting with Jean-Claude Juncker as a positive result of recent trade war escalations, but broader political sentiment was mixed. Concerns around US trade policies this year have significantly contributed to uncertainty within International Trade, and that’s not likely to stop anytime soon, even after this week’s more subdued messaging. Our position on tariffs, both proposed and implemented, are that they are likely part of a negotiation strategy by the President. Even so, we’ve been surprised by how far the tariffs have been taken thus far, and its possible that we’ll see further tariffs implemented.

Overall, 2018 has been positive for investors who’ve maintained a US Equity focus in their portfolio. We hope to see continued growth for as long as it will last, but we urge investors to remember that markets move in both directions. Better to maintain a diversified approach than to believe that anyone can perfectly predict the multitude of factors that drive a global economy.

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