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Jerome Powell, President of the Federal Reserve, testifies at a hearing before the Senate Committee on Banking, Housing and Urban Affairs, July 17, 2018, at Capitol Hill, Washington, DC (19459000) . Photo by Alex Wong / Getty Images)
Remember a few years ago when people were saying that the dollar was dead, that it was going to weaken beyond belief, that the yuan Chinese would take over emerging markets.
Only, like the peak oil theory in 2001-02, the dead dollar theory should also be dead. Meanwhile a major financial crisis and institutional investors and billionaires decide to put more of their money . wealth in Bitcoin, the dollar is here to stay, the euro has not managed to eliminate it, the renminbi has not nearly done away with it.
And this week, the biggest hurdle to profit was not a slow economy and trade wars, it's a strong dollar, says Dan Russo, chief marke t technician for Chaikin Analytics, a company action research.
" Trade tensions were not a major directional engine for the market last week ," Russo explains. "Investors seemed to ignore Trump's comments on the desire to impose tariffs on more than 500 billion dollars of Chinese imports."
The US government plans to impose tariffs on $ 200 billion worth of goods manufactured in China from the United States. here the end of summer. China is already facing tariffs of about $ 50 billion, promulgated by the Trump administration this month.
The S & P 500 has stabilized relatively for the week despite Trump's trade war and hysteria. Wall Street investors wear some kind of hearing protection because the political noise has reached 130 decibels, which is detrimental to the battery. US investors, meanwhile, are doing well. Since the beginning of the year, it is the best performance of all developed markets
The Nasdaq closed higher last week. The Russell 2000, primarily mid-cap and small cap companies, beat all indexes last week to close just below its historical high. US financial and industrial stocks posted solid gains. Technology stocks have again outperformed and the dollar index is a bit weaker on the Fed's interest rate policies meaning more dollar inflows, which means a stronger dollar in the simplest of results
Trump wants to test the independence of the Fed! Not really. Libby Cantrill, executive vice president of Pacific Investment Management Co., says it's not uncommon for a president to criticize the Fed. Photographer: Christopher Goodney / Bloomberg
"This is not unprecedented, what Trump has said about the Fed," said Libby Cantrill, PIMCO's chief public policy officer. Cantrill was speaking on Bloomberg TV on July 20 about Trump's criticism of the Fed's monetary policy.
According to FactSet, earnings growth per share of US companies in the second quarter is around 20%, compared to 18.9% at the end of the first quarter. Of the 17% of companies that reported profits so far, including Honeywell (HON) and medical equipment manufacturer Danaher (DHR), 87% of them beat their estimates of profits.
It is still early in the season of results, but If this continues, it will give the pace for the rest of the year. And it seals the story that the Trump administration has been a strong positive for the economy. In addition, those who argue that the economy has been spurred by Obama will have trouble explaining why two of the biggest growth drivers have been the tax cuts and regulatory cuts in the US. Obama era. There is also the labor market situation, with blue-collar workers in employment and not two or three jobs. It's hard to say if this is the direct result of blue-collar immigration. No official report has been sent on this issue, although anecdotal evidence suggests that jobs often taken by undocumented workers – such as construction and delivery services – are taken care of by American workers.
Chaikin Analytics: the indices are overbought. A strong dollar is better for small caps than for large caps because some of them will be more dependent on export markets. Photographer: Michael Nagle / Bloomberg
Russo said that of all conference calls he has attended, companies "have largely downplayed any significant impact of business tensions."
In fact, "the greatest headwinds"
The increase in input costs could also include aluminum.The US government has imposed tariffs on imports of aluminum. steel and aluminum from Brazil, Russia and other suppliers.
This week, some 174 S & P 500 companies will release their second quarter results. understand the strong dollar and trade policy in general.Haliburton Energy Infrastructure Company (HAL) and Importer of Illinois Tool Works (ITW) metals could have information on energy prices and tariffs during their statement this week.Chinese Baidu (BIDU) should be interesting, as Chinese policymakers tightened the money supply in the second quarter, but should relax in the third. Baidu should be interesting about the direction of China in the coming months.
Most investors believe that the third quarter will be the time when the impacts of the trade war will be more widely felt, according to industry
. 19659003] "If the dollar appreciates, small cap stocks may return to outperforming large cap equities," Russo says, as large cap stocks may be more tied to equity markets. global exports.
