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Jul 30 2018

7/30/18 Market Notes

Facebook (FB) wiped over $119 billion off its market cap last week, after releasing slightly
disappointing earnings results. Much like Netflix the week prior, North American subscriber growth
was the biggest culprit within the data. With three of the four FANG stocks having reported already,
all eyes will be on Tuesday’s earnings release by Apple (APPL). The company is expected to report
earnings of $2.17 per share on $52.37 billion of revenue. Looking beyond the report, investors will be
keen to hear about foreign earnings repatriation, and changes to the company’s dividend policy, as
well as how the current trade war between China and the United States may be impacting its supply

Brexit, the Bank of Japan monetary policy meeting, President Trump’s meeting with the Italian Prime
Minister, and the ECB meeting are all part of a very full agenda this week. While the voluminous
calendar of events could spark some additional volatility, investors are more likely to ignore
geopolitics this week and focus on corporate earnings as well as some key domestic data, particularly
housing related data.

In spite of recent volatility and a general feeling of unease, the S&P 500 is up about 5 ½% so far this
year, while the small-cap stocks as represented by the Russell 2000 index are up over 8% year to date.
In other words, markets are up nicely just past the half way mark of the year, in particular when
considering that the fourth quarter tends to be one of the strongest performers for equity investors.
However, escalating trade tensions between the United States and the rest of the world could derail
both markets and our economy. Following last week’s successful meeting between President Trump
and European Union President Jean-Claude Juncker, and reports of progress in renegotiating NAFRA,
market participants will likely want to get some details and follow through; or at the very least avoid
new harsh rhetoric.

Asian, European and pre-market U.S. equity future are all lower this morning, as investors wait for
key data releases. Oil prices are near $70 per barrel, as WTI is trading at $69.59 this morning on the
back of a strengthening U.S. dollar. Treasury yields are up slightly, as the benchmark 10 year yield
encroaches on the psychologically important 3% level.


The GGFS Investment Committee