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Jul 31 2018

7/31/18 Market Notes

The sell-off in technology stocks continued on Monday, dragging broader markets down as seven of
the eleven sectors of the S&P declined. The Dow Jones Industrial Average lost 144 points, while the
S&P lost a similar 0.58%. Technology shares lost 1.78% as a sector, while telecom shares rose 1.95%
as a group.

On the economic front, pending home sales rose 1/3rd as much as forecast, disappointing investors
ahead of today’s inflation, consumer spending and home price data. Oil prices ended the day above
$70 per barrel (WTI), while gold prices continued to slip and U.S. Treasury yields rose mildly ahead
of tomorrow’s FOMC meeting minute release.

While earnings season has been very strong, several prominent corporate chieftains have expressed
concerns over the direction of trade policy and the impact it is having on their businesses. Yesterday
The Coca Cola Company (KO) was the latest to warn that newly imposed tariffs are creating profit
pressures and that the company would pass through some of these increases in form of price hikes.
Premarket equity futures are pointing to a mixed open this morning, ahead of earnings from Pfizer
(PFE), Proctor & Gamble (PG) and Apple (AAPL). The latter is the fourth of the so-called FANG
stocks to report, two of which have sharply disappointed investors.

The Treasury is contemplating further tax cuts, which would almost exclusively benefit the wealthiest
Americans. The proposal is being met with resistance from Democrats as well as some Republicans
who are voicing concern over the projected $1 trillion plus budget deficit for next year. Separately,
President Trump has threatened to ‘shut-down’ the government if Congress doesn’t approve funding
for “his” boarder wall; Senate Majority Leader Mitch McConnell stated that he has no plans or
intentions to shut-down the government over boarder wall funding. The statements by President
Trump are seen to further complicate NAFTA negotiations with the newly elected leftist President of


The GGFS Investment Committee