Market Direction: BULLISH alert
issued 2/15/2018
What do you think is more concerning tariff wars or interest rates? Leave a comment. Now for the news…
The economy
There were a heap of headlines out of Washington this week, but Wall Street kept its cool, finishing little changed. The S&P 500 finished flat, while the Dow Jones Industrial Average finished a tick higher (+0.2%), and the Nasdaq Composite finished a tick lower (-0.1%). The small-cap Russell 2000 outperformed, rallying 0.6%.
President Trump capped a week-long trip to Europe on Monday by meeting with Russian president Vladimir Putin in Helsinki, Finland. The leaders met for roughly four hours, discussing a wide range of topics, including arms control, the future of Syria, and, of course, Russian interference in the 2016 U.S. election, which Mr. Putin again denied.
Mr. Trump faced criticism for appearing to reject his own intelligence agencies' conclusion that Russia meddled in the election in favor of Mr. Putin's plea of innocence. President Trump later clarified his remarks, replacing the word would with wouldn't in the following statement referring to Russian interference: "I don't see any reason why it would be [Russia]."
On to U.S.-China trade relations, NEC Director Larry Kudlow said on Wednesday that he believes some lower-ranking Chinese officials would like to reach a trade deal, but Chinese President Xi is refusing to compromise. China's foreign ministry responded to Mr. Kudlow's comment, calling it "shocking" and "bogus."
Back to Mr. Trump, the president did an exclusive interview with CNBC on Thursday in which he criticized the Fed, saying he's "not thrilled" about interest rate hikes, and said he is willing to slap tariffs on $500 billion worth of Chinese goods -- virtually every Chinese product coming into the U.S. -- if necessary. Mr. Trump also commented on the strengthening dollar, saying it puts the U.S. at a disadvantage.
The president followed up that interview with a tweet on Friday, saying "China, the European Union and others have been manipulating their currencies and interest rates lower, while the U.S. is raising rates while the dollars gets stronger and stronger with each passing day - taking away our big competitive edge...Tightening now hurts all that we have done."
Mr. Trump's comments on the Fed were particularly controversial as presidents typically refrain from speaking on monetary policy in an effort to protect the Fed's independence. The White House issued a follow-up statement after the CNBC clip aired on Thursday, clarifying that Mr. Trump respects the Fed's independence.
On a separate -- but related -- note, Fed Chair Jerome Powell gave Congress his semiannual update on the economy and monetary policy, speaking before both the Senate Banking Committee and the House Financial Services Committee. Mr. Powell's testimony provided no new information; he simply reinforced the view that improving economic conditions should allow the Fed to continue hiking rates gradually.
Energy was the worst-performing sector this week, losing 1.9%, as crude oil extended last week's tumble; WTI crude futures dropped 3.9% to $68.23/bbl and are now 8.0% below the nearly three-and-a-half year high they've touched several times this month. Fears that the U.S. may give some countries waivers to continue buying oil from Iran was one of several factors weighing on the commodity.
By the numbers the weekly closing index numbers compared to the initial BULLISH recommendation closing numbers:
Stock Market Closing Numbers
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compared to Recommendation Numbers
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2/15/2018
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7/20/2018
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Difference
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25,200.37
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25,058.12
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142.25
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7,256.43
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7,820.20
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563.77
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2,731.20
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2,801.83
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70.63
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