Global Impact

This week is starting off on a down note in U.S. markets. This is largely driven by negative news about how one of the largest retail developers in China is looking at potential bankruptcy. The reason this may be impactful on global markets is because this retail developer is a $300 billion worth of debt company, which is a lot of debt to default. However, almost all of that is centered in China so why are U.S. markets down? The Chinese and Japanese markets are both closed today for holiday so, when investors can’t sell what they want to sell, they sell what they can. We may see some contagion from Chinese investors wanting to de-risk their portfolios, which pushes our markets lower. It may be a good thing because that means it might not last past today. While looking at the international markets and what is driving our markets today, we want to look forward to where our support is right now to see what could our strength come from that could stop this fall in the markets.

Technical Analysis

We saw a lot of volatility continue in the markets last week with the S&P 500 closing on Friday at a price of 4,432. That pushes the resistance level to 4,460 and the support level to 4,400. The 100-day moving average is now sitting at 4,326. Over the last month, we have talked about what the support level for the end of the year is estimated to be which is 4,360. Right now, we are seeing the 100-day moving average hover around the same price as the year-end support level. That’s the number to look at from now until the end of the year to see if we can keep and hold that price level. If it goes under and stays there, that may be a point where we start to see the bears come out in the markets. Holding that support level price of 4,360 is very important, especially when you see markets fall. It builds context and shows that we are really not falling that far. It feels like the market is down a good bit, but we aren’t even back to the average of the last hundred days so it’s important to keep these numbers in mind.

The Consumer

Domestically, we are seeing good numbers from the consumer as retail sales were up 0.7% for August and a 15.1% year-over-year gain in retail sales. The largest boost in retail sales mostly came from online shopping where online sales alone increased 5.3%. This kind of information is very important as the Federal Reserve meets this week and is something we’re focusing on domestically.

The Federal Reserve

The Federal Reserve doesn’t just look at the U.S. economy, they also look at the overall global economy. It’s going to be interesting to hear what they think after their meeting this week regarding not just China, but also Europe. While the U.S. economy remains strong, Europe’s higher energy prices are really starting to slow down the global economy. You can see on the chart shown in the video for this episode, that the U.S. actually has north of 10 million job openings right now. Compare that to roughly 5 million unemployed individuals. The Fed may be looking at the U.S. economy and thinking that there are plenty of jobs being created but maybe we don’t have the proper training available or maybe individuals aren’t taking up the jobs at the rate that they are opening. It takes a long time to employ 5 million people. The U.S. economy may be creating enough jobs to support the Fed’s tightening. If that’s the case, the market would definitely take pause and note of that. Will the Fed mention any of this international uncertainty as they meet next over the next few days? If so, their decision will be very impactful, not just in the U.S., but globally. This is something to watch closely with a strong U.S. consumer, what appears to be a strong job market, but also a lot of weakness internationally.

 

Trey Booth, CFA®, AIF®
Chief Investment Officer
Wealth Consultant
Email Trey Booth here

Adam Vansant, AIF®, BFA
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.

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