Small Business Optimism
Happy Tax Day! Last week we talked about the importance of the economic reports turning positive. We got more confirmation on that when we saw small business optimism improved in March. Why do we care about that and why should you care as an investor? We care because small business optimism is directly correlated with boosting productivity. We need that aspect in a mature business cycle which we now have. It’s great to see the improvements being made.
U.S. weekly jobless claims is the number of Americans filing applications for unemployment benefits. This number dropped to a 49 ½ year low last week. We have witnessed a consistent drop over the last four weeks in the U.S. weekly jobless claims number and we hope to see that continue. This proves that despite the global slowdown, the labor market is staying strong. Also, there’s been increased productivity for small businesses. That should also continue to strengthen moving forward. It affects the economy when more people are making money and fewer people are on benefits coming from the government such as unemployment benefits. Small businesses have shown employment growth as well. So, there is a lot of positivity surrounding this report on the decrease in jobless claims.
Positive Trade Talk
The U.S. and China trade talks have had a lot of positive developments over the last couple of weeks, especially last week. Over the weekend, there was a breakthrough in the U.S. and China trade talks. The Chinese have agreed to let the U.S monitor, systematize, and punish their currency manipulation. Currency manipulation has been huge for China in the past in pushing exports beyond where they should be. The fact that the U.S. got an agreement with them on this topic is a big deal.
This week will be a short one for trading since the markets are closed for Good Friday. However, it’s still a crucial week with earnings coming out. The financial industry is hitting the earnings week early and strong. Late last year the Fed was steady raising rates which wasn’t good for financials because, typically, they get to carry what the Fed pays them for overnight reserves minus what they pay out the depositors. Going into this year it will be a completely different mechanism. The Fed is no longer going to be raising rates, so the question will be about how financials turned out last quarter and last year versus what they’re looking forward to this year. This will be the earliest indicator of the change in the Fed policy impacting the real U.S. economy and the real U.S. markets. We’re also looking forward to the Beige Book release for the Fed mortgage applications and retail sales. So, even though it’s a short week, we have a lot to look forward to.
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