The biggest week of earnings season is here! The potential market mover could be the GDP report that will be released. Economists are saying the GDP report will come out at around 2.1% which is below the 2019 first-quarter numbers. It was 3.1% for that first quarter. There could be a few bright spots that we want to look at as well. Consumer spending picked up after the first quarter. There’s no hiding that we had a really weak first quarter. In June we had a rise in U.S. retail sales of 0.4% which closed a strong second-quarter. We’re starting to see strong consumer spending going into this big earnings week. It’s going to be something to keep an eye on as we get through this week and leading up to the GDP report on Friday. We talk about consumer spending all the time because it’s 70% of our economy. On the GDP report, we are expecting to see a surge in consumer spending. The problem is, we can see an uptick in trade deficit, lower inventories and lower business spending. The manufacturing sector is showing a lot of weakness because of the trade war. The Fed is going to be watching that number coming out on Friday and the Fed will be in control of the market movement. The Fed has been the big topic, especially this summer, about possibly lowering interest rates so it will be interesting to see what the outcome will be at the end of this week.
Rate Cuts Around The World
A lot of central banks around the world have already lowered rates this year, including three last week. Australia has cut rates twice this year while New Zealand, India, Malaysia, Philippines, Indonesia, South Africa and just last week South Korea, which is another major economy, all have cut theirs at least once. This is syncing up in terms of rate cuts, including our own, much like it did in 2008. Another thing that could be a factor is taking place here in the United States, which relates to deregulation, is what’s happening in the Department of Labor. There is a new appointee at the Department of Labor, Eugene Scalia. Eugene is the son of the late Supreme Court Justice, Antonin Scalia, who has a tremendous reputation in keeping regulations reasonable. If Eugene ends up being confirmed to be Secretary of Labor that will be very good for business and markets.
This week the conservative party over in the UK will announce their new leader and that person will become the Prime Minister. For all intents and purposes, with how much time is left between now and when Brexit must happen, the person elected this week will be the prime minister that will take England out of the European Union. That alone makes this individual much more important. You may not know the name Boris Johnson, who’s likely going to be the new prime minister, but over the next few months you can expect that he will become a household name because of how important this transition of The United Kingdom leaving the European Union is. Depending on how smooth that is or isn’t will be a huge deal. Boris is known for his hardline opinion on Brexit which says a lot about this election and a lot of about him becoming the new prime minister. He also has a very big personality to match up with other big political personalities, globally. He will become the face of the UK for the foreseeable future and could have an impact not only on Great Britain but also, we could potentially start to see The European Union become unraveled. We are watching to see how smooth this process goes and how well Britain does after the fact. Maybe some trade deals with other countries like the United States could prove that their leaving the European Union isn’t the end of time.
Greg Powell, CIMA®
President and CEO
Email Greg Powell here
Bobby Norman, CFP®, AIF®
Senior Vice President
Email Bobby Norman here
Ashley Page, JD, MBA
Senior Vice President
Email Ashley Page here
Trey Booth, CFA®, AIF®
Senior Vice President
Email Trey Booth here
Associate Vice President
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.
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