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Aug 24 2018

8/24/18 Market Notes

Markets were mostly lower, albeit only slightly, as investors grew increasingly nervous about the
effects of a trade war with China. The renewed concerns came after the latest Fed minutes showed
that members of the Federal Open Market Committee (FOMC) are concerned about the impact of
tariffs and the Fed’s readiness and ability to act when the next recession occurs. Although the S&P
500 only ended 0.17% lower, 10 of the 11 sectors of the index were down with technology being the
only bright spot. The economically sensitive sectors such as Materials, Energy and Industrials led the
market lower, while consumer staples and discretionary shares fell by about ¼%.

European and Asian bourses are higher overnight, as are U.S. equity futures as investors wait to
formal comments by Fed Chairman Powell. Observers will be particularly focused on any references
to tariffs and their historical impact on economies, in particular after trade talks between China and
the United States ended yesterday with virtually no progress at all. The Chief Executive Office of The
American Apparel and Footwear Association said in an interview “We’re watching the Titanic sail out
of port here; this is not a good thing”, in response to the level of concern he and the apparel industry
have over the situation.

Oil prices are up nearly 2% as new sanctions against Iran take effect, causing traders to worry about
tighter supplies. The U.S. dollar and Treasury prices are also lower this morning, ahead of the second
day of the Jackson Hole summit.

On the economic front, New Home sales fell to a nine month low, as a shortage of supply, rising
interest rates and a dip in consumer confidence dominated sentiment in July. This morning’s Durable
Goods order report showed a decline in orders of 1.7%, greater than the 0.5% expected decline. A dip
in aircraft orders is being cited as the main reason for the greater than forecast drop.



The GGFS Investment Committee