GDP and Earnings
Earnings are continuing to come in strong. However, the indexes have remained relatively flat. This has us saying “Show Me the Market.” Last Friday a strong GDP number was reported at 2.3%. This time last year the GDP number was at 1.2%. An important contributor of this number is business investment. This suggests that businesses are reinvesting and using tax cuts to their benefit.
This week is loaded with economic news. On Monday reports will come out on personal income and pending home sales. We will get to see what impact yields are having on the housing market. Tuesday will include reports on manufacturing. On Wednesday the Fed will hold meetings in which we don’t expect any action. On Thursday productivity and factory orders will be addressed. Lastly, on Friday the narrative will include jobs reports and unemployment numbers. With all that is occurring in the markets, along with great earnings, we are waiting on the market to react.
There are some data points to address with the busy week ahead. The first covers the trade report coming out on Thursday. With so much discussion revolving around tariffs, this may draw more attention than normal. The Federal Reserve meeting on Thursday could pull in a lot of focus because everyone is trying to determine their initiative with the addition of new key members. In relation to the GDP number being reported, it’s important to look at how companies invest. Typically, when companies have extra cash on hand they can either invest it in long term growth or they can buy their own stock. Buying back their own stock is usually great for the short term market. While earnings season is occurring there is a blackout period in which companies cannot do this. This has reduced, what usually plays, a big hand in the markets.
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