Quote of the Week
“I never considered a difference of opinion in politics, in religion, in philosophy, as cause for withdrawing from a friend.” – Thomas Jefferson
Stocks were on track to finish higher for the week until China unveiled on Friday a new round of retaliatory tariffs and Mr. Trump vowed to respond by raising tariffs even further, unnerving the markets. In this latest episode of escalation in trade tensions, China announced that it would impose tariffs ranging from 5% to 10% on $75 billion of U.S. goods in two batches, effective on September 1 and December 15, plus including a 25% tariff on U.S. cars.
At the annual central bank summit in Jackson Hole, Fed Chairman Powell left the door open for another rate cut when the committee meets next month, acknowledging the risks to global and U.S. growth from trade uncertainty. Mr. Trump was very upset that the Fed wasn’t more aggressive in its statement. He tweeted that he wasn’t sure who was a bigger enemy of the U.S., Chairman Powell or Chairman Xi.
Markets regained a bit of composure for most of last week. That limb wasn’t too tough to reach given the comparison in. a frantic August in which the Dow rose or fell by more than 300 points in seven of the preceding 10 days. After rising for most of the week, a tariff-induced pullback late on Friday led U.S. stocks lower by 1.4% for the week extending August’s streak of weekly declines to four straight weeks.
The leaders of Corporate America are cashing in their chips as doubts grow about the sustainability of the longest bull market in U.S. history.
Corporate insiders have sold an average of $600 million of stock per day in August, according to TrimTabs Investment Research, which tracks stock market liquidity. August is on track to be the fifth month of the year in which insider selling topped $10 billion. The only other times that has happened was 2006 and 2007, the period before the last bear market in stocks.
Investors often view insider buying or selling, which are transactions performed by top executives, leading shareholders, and directors, as a signal of confidence. Even though the stock market is much larger than it was in 2007, the $10 billion mark may not mean as much now as it did then. However, the acceleration of insiders heading for the exits could indicate concern about the challenges ahead, especially as the US-China trade war threatens to set off a recession.
So, where do we go from here? In my opinion, with the economies around the world and in the U.S. declining at a faster pace there doesn’t seem to be much of a hope now for the stock market to reverse its decline. Plus, if you add in the frenetic pronouncements from the White House, that just makes the future look more uncertain at this time. Business leaders are frozen in place not knowing what to do.
Things could always change for the better, and they will at some time. Meanwhile, we will continue to maintain our positions in fixed income, gold, and utilities which historically have done well in distressed times.
Back to School Shopping
It’s that time of year again. The following article caught my interest because I recently spent what I thought was a lot of money to send my daughter back to school. I was surprised to learn I didn’t spend nearly as much as this survey predicts.
Survey Details Back-to-School Spending for 2019
The National Retail Federation (NRF) and Proper Insights & Analytics recently released a survey detailing back-to-school spending for the 2019 school year. The survey looks at how American families plan to shop for clothing, supplies, and other items for the school year.
Record spending expected for 2019
As students prepare to go back to school and college, families are spending more than ever on school supplies. “Consumers are in a strong position given the nation’s growing economy, and we see this reflected in what they say they will spend on back-to-class items this year,” NRF president and CEO Matthew Shay said.
According to the NRF, families with children in elementary school through high school plan to spend an average of $696.70, up from $684.79 last year and topping the previous record of $688.62 set in 2012. Families with college students are expected to spend even more — an average of $976.78, which is up from $942.17 last year and exceeds the previous record of $969.88 set in 2017.
The survey also revealed that total combined spending for K-12 and college is projected to reach $80.7 billion. This figure is down from last year’s $82.8 billion, but is attributed to the decreased number of households surveyed with children in K-12 or attending college.
Clothing and accessories are expected to top K-12 families’ expenses at an average of $239.82, followed by electronics such as computers, calculators, and phones ($203.44); and shoes ($135.96) and supplies such as notebooks, pencils, backpacks, and lunch boxes ($117.49). K-12 families plan to do most of their shopping at department stores (53%), discount stores (50%), online (49%), clothing stores (45%), and office supply stores (31%).
College shoppers plan to spend the most on electronics ($234.69), followed by clothing and accessories ($148.54), dorm and apartment furnishings ($120.19), and food items ($98.72). They plan to do most of their shopping online (45%), followed by department stores (39%), discount stores (36%), college bookstores (32%), and office supply stores (29%).
The survey shows that among K-12 shoppers, teens are expected to spend an average of $36.71 of their own money, up from $30.88 ten years ago. Pre-teens plan on spending $26.40, up from $11.94 ten years ago. According to Shay, “Members of Generation Z are clearly becoming more involved with back-to-school purchasing decisions rather than leaving the choices up to mom and dad.”
Copyright 2019 Broadridge Investor Communication Solutions, Inc
By the Numbers
BIG BUCKS – The 2020 Summer Olympics will be held in Tokyo, Japan over 17 days beginning Friday 7/24/20. Olympic organizers in Japan have already raised more than $3.1 billion in sponsorship funds, making the games the largest financially sponsored event in sports history (source: Tokyo Organizing Committee). Michael A. Higley, BTN 08-26-2019
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These are the opinions of Larry Lof and Stephanie Mayoral and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Past performance is not indicative of future results. Due to our compliance review process, delayed dissemination of this commentary occurs.
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