Double Whammy

Volatility is back in the markets. We kind of had a double whammy last week as the S&P 500 traded back more than 3%. The double whammy started with the Fed cutting rates, which was expected as we talked about it on the vlog last week. The Fed chairman, Jerome Powell, did not give the markets what it was looking for in terms of future cuts. The market traders started trading back on that news. Then, about 24 hours later, President Trump announced an additional 10% tariff on the remaining $300 billion’ worth of Chinese goods. This chain continues to impact the economy. Trading matters for manufacturing which matters for profits and profits matter for future business spending. It seems to be a chain reaction and is starting have an impact.

Mexico & Canada

Mexico and Canada are also a large part of trading with the U.S. When you hear about trading on the news, you could be led to think that China makes up most of the U.S. trading. It seems like they are responsible for at least half of our trading but they’re not. China is only about 15% of it, which isn’t a big number at all. If you combine Mexico and Canada, they make up around 30% which almost doubles up China. Tariffs can be short term or long term, but you must keep things in perspective. Our neighbors are still double the size, in terms of trade talk, of China. We’ll continue to talk about this until the trade deadline on September 1, 2019. The market will most likely be volatile based on what news is coming out until then.

Positive News

Last week we talked about the consumer which we’ve said many times is the backbone of our economy. We’ve been looking for the consumer numbers to be the lift in the markets and our economy. The consumer confidence number came out at 135.7 which ended up being way stronger than expected. That number shows current economic conditions and provides consumer expectations for the next six months. The consumer is confident right that this trend is going to continue. However, the markets took a dip due to the U.S. trade war with China despite the positive number. Consumer spending for April, May, and June of this year was the best that it’s been since 2017 which proves that the consumer continues to be the strong point of this current economy. The unemployment rate has also been low but now with the tariffs and everything else going on, we might see that be affected as well.

Highlight on Healthcare

If you look at businesses we tend to focus on trading but another major cost for all companies is healthcare unless they force their employees to carry it on their own, which most companies don’t. One thing that could be a big item going forward is that last week the Trump administration announced impending regulations on healthcare that could be coming as soon as this January. Hospitals will have to publish their rates on most of their medical procedures and be required to publish their discounted rates as well. Even if somebody goes in for treatments that are insured, those people would be able the see all the rates. Beginning in January 2020, if there are no litigations from insurance companies and hospitals to stop or delay it, you will have the ability to compare costs between hospitals and providers. That type of effort always pressures costs down and so we’re watching that carefully for next year. That could provide some healthcare relief if that comes into effect. We’ve also witnessed during Democratic debates that healthcare has been a big topic, so it’s important to keep an eye on the administration discussing this topic.

 

Bobby Norman, CFP®, AIF®
Senior Vice President
Wealth Consultant
Email Bobby Norman here

Ashley Page, JD, MBA
Senior Vice President
Wealth Consultant
Email Ashley Page here

Adam Vansant, AIF®
Associate Vice President
Wealth Consultant
Email Adam Vansant here

 

Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Economic forecasts set forth in this presentation may not develop as predicted.

No strategy can ensure success or protect against a loss.
Stock investing involves risk including potential loss of principal.

Securities and advisory services offered through LPL Financial, Member FINRA/SIPC and a registered investment advisor.

#397 China - Tariffs vs Trends #395 Business Cycles Today