What to Watch for this Week
Today starts the fourth quarter of 2017. As usual, the first week of the month and the quarter is a big week for economic data, and the calendar and news schedule is full. Last week President Trump announced the tax reform plan, this week everyone would have a reason to hate or to like it, drawing their conclusions about the merits. Mark Guthner posted the details of the tax plan here.
September closed at SPX 2519.36, and the VIX was below 10 at 9.51. September 2017 marks the least volatile September on record. Wednesday of last week, the Russell 2000 had it best day of the year, increasing 1.5%. The RUT is up nearly 10% since August 15th, 2017.
The Economy and stock prices. We are still in one of the most hated bull markets. I wonder if the internet and the ability for conflicting viewpoints to cloud sound judgment is one of the causes. Remember to look at the economy simply. Economic strength leads to better corporate earnings which lead to higher stock prices. Sure there will be ups and downs, in the long run, this holds true.
On the global front, according to the BBC, North Korea and the U.S. are in direct contact. President Trump has confirmed with a tweet saying “It is a waste of time to negotiate with ‘Rocket Man'” We believe contact no matter how small is better than no contact or Twitter contact. While the negotiations take place, the threat, it seems will be reduced.
In Germany, the Far Right’s Success Spooks Traditional Parties. The federal elections in Germany led to a worse-than-expected performance by Chancellor Angela Merkel’s conservatives, who now need to negotiate with at least two parties to form a government.
The Catalan Referendum Takes Center Stage. This week will be key for the future of Catalonia. The Catalan regional government planned an independence referendum on Oct. 1 that the Spanish government considered illegal and moved to block.
U.S. Duty on Bombardier Taxes British and Canadian Patience. On Sept. 26, the U.S. Department of Commerce slapped a preliminary 220 percent duty on Bombardier’s C Series jets after Boeing filed a complaint arguing that the Quebec-based airplane manufacturer had received subsidies in Canada and it was dumping the planes on the U.S. market.
Economic Calendar
Earnings Season will being this week; we will get a better view into how corporations faried in Q3. The focus could shift from politics to fundamentals. Wall Street currently expects the S&P 500 to report Q3 earnings of $32.90 per share. The S&P 500 is currently expected to earn $127.05 this year and $144.71 next year. That means the stock market is currently going for 17.3 times next year’s earnings, elevated but not in bubble territory.
The state of the economy and the employment situation will be the main drivers to the tax policy change being discussed in Congress.
Last Weeks Numbers
