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Aug 17 2018

8/17/18 Market Notes

Word of newly scheduled Shino-American trade talks lifted investor mood and share prices on
Thursday. The Dow Jones Industrial Average climbed 396 points (1.58%) and the S&P 500 gained
0.79%, as sectors of the S&P ended higher. Telecom, consumer staples and utilities rose most, while
the technology sector edged up a mere ¼%. Treasury yields rose slightly after the U.S. dollar reversed
some of its earlier strong gains, and oil rebounded off its intraday lows. In a reversal of normal
patterns, it appears that U.S. technology shares traded mixed to lower in sympathy to a poor earnings
report by Chinese technology powerhouse Tencent, which is often compared to Amazon (AMZN) as
they have similar core businesses.

 
On the economic front, Housing Starts and Building Permits both came in below expectations in a
further sign that the economically critical housing market continues to cool off. While home prices
remain high, affordability is increasingly narrowing as rising interest rates and lack of supply have
driven costs higher. Southern California and portions of the North East, in particular States with
relatively high taxes (real estate and income), are feeling the most pricing pressure. This mornings
(Friday) Consumer Sentiment and Leading Indicators data will provide further insights into the
strength of the economy.

 
The Euro, Oil prices, and Treasury prices are all higher this morning as geopolitical and trade tensions
are easing. The next round of trade talks between China and the United States are preliminarily set for
late August, while talks between the U.S. and Mexico appear to be progressing at a steady pace. All
the while there is little progress being made between Canada and the United States, nor has there been
any material advances in trade talks with Europe. None-the-less, there does appear to be a change in
tone and a renewed willingness to negotiate by all sides, something investors are sure to welcome.

 
Next week could be interesting for market participants, as there is little economic news being released.
The Fed will release its FOMC minutes on Wednesday and the annual Jackson Hole economic
symposium kicks off on Thursday. International finance and business leaders will gather in Jackson
Hole, Wyoming to discuss the state of the world’s affairs and outlook.

 

Sincerely,

The GGFS Investment Committee