The Dow Jones index is the last index standing when it comes to new all-time highs. All indices hit a new all-time high in January and sharply corrected but have slowly rebuilt into new highs this summer. If the DOW joins the party, it would signal that the bull market is on solid ground and on track for the foreseeable future. Let’s take a look at the DOW Jones chart and a projected upside target based on the high/low of the January correction:
The S&P 500 chart is breaking to new highs so the uptrend looks intact:
Next week should be quiet given it is essentially the last week of summer and there is nothing of note on the calendar until after the Labor Day holiday where jobs data, the September Fed meeting and mid-term elections will be the center of attention. Just keep in mind that the market is the news and that everything else is just hyperbole!
Have a great last week of summer!
Chart of the Week!
Venezuela resorted to desperate measures on Monday, lopping off five zeros from the bolívar in an attempt to arrest the country’s economic collapse, which has caused millions of Venezuelans to go hungry or flee the country. The government of Venezuela has robbed its citizens of its wealth through its economic policies.
Economic & Central Banking Snippets
- From July 2017 to July 2018, 34 states added nonfarm payroll jobs, and employment was essentially unchanged in 16 states and the District of Columbia. The largest job gains occurred in Texas (377,100), California (332,700), and Florida (210,600). The largest percentage gain occurred in Utah (3.5%), followed by Idaho and Nevada (3.4% each).
- Sales of previously owned homes in the US unexpectedly fell for the fourth consecutive month in July to their slowest pace in more than two years, data on Wednesday showed. Existing home sales, which account for the bulk of housing stock, fell 0.7% in July according to the National Association of Realtors. “Led by a notable decrease in closings in the north-east, existing home sales trailed off again last month, sliding to their slowest pace since February 2016 at 5.21 million,” said chief economist Lawrence Yun. “Too many would-be buyers are either being priced out, or are deciding to postpone their search until more homes in their price range come on to the market.” (FT)
- Germany recorded a record budget surplus in the first half of 2018, an achievement that immediately triggered calls for tax cuts and higher public investment. According to figures released by the federal statistical office, Germany had a surplus of €48.1bn in the first six months of 2018, equivalent to 2.9% of economic output — the highest level since German reunification in 1990. The figure is much higher than the surplus for the whole of last year, which stood at €34bn. That suggests that the number for 2018 could set new records. (FT)
- Global retailers looking to tap into the lucrative China consumer market have almost no real choice but to partner with online beasts Alibaba or Tencent, according to Bain’s James Root. He said the two firms have become overwhelmingly dominant over the last four to five years to force the hands of retailers. “I’m describing a world of highly concentrated control amongst these two firms and the ecosystems around them,” Root maintained. To that point, Alibaba and Tencent own or control four out of five of China’s largest hypermarket and supermarket chains. (Seeking Alpha)
- Credit Suisse has become the first bank to issue debt tied to the new US interest rate chosen to replace the London Interbank Offered Rate (Libor), selling a $100m six-month certificate of deposit on Monday. The bank is the third institution overall to issue debt tied to the Secured Overnight Financing Rate (Sofr), following a $6B floating rate note from mortgage agency Fannie Mae and a $1B floating rate bond from the World Bank. The issuance comes as the financial industry attempts to move away from Libor, following a rigging scandal and a decline in transaction volumes in the underlying market. (FT)
- Last week, a report revealed that Google continues to collect location data from users even when “Location History” is disabled in its options. The company was unapologetic, but did change its location policy. Now, a man in California is going to court to accuse Google of violating the state’s privacy laws. (Gizmodo)
- Facebook plans to pull its data-security app from Apple Inc.’s app store after the iPhone maker ruled that the service violated its data-collection policies. Apple’s decision widens the schism between the two tech giants over privacy and is a blow to Facebook, which has used data gathered through the app to track rivals and scope out new product categories. (WSJ)
- Global sales for electric vehicles rose 77% in Q2 from a year ago to 411K, according to data from Bloomberg NEF. China accounted for more than half of the quarterly tally, while Europe accounted for 22% and North America came in with 19% global market share. EVs accounted for a record high of 3.9% of all passenger car sales in China. Manufacturers accounting for a significant part of the EV gains include BYD, Tesla, Nissan, Toyota, Renault, BAIC and Chinese state-owned JAC Motors. (Seeking Alpha)
That is all for now until next week’s Market Update. If someone forwarded you a copy of this report, you can sign-up directly at www.kiscocap.com.
Please reach out to me if there is anything you want to discuss about the markets, your portfolio (for clients) or if you would like a copy of the firm’s brochure if you are not a client.
Paul J. McCarthy, III
President – Kisco Capital