Markets are rebounding today after yesterday’s precipitous fall, in which the S&P 500 and Dow Jones Industrials both experienced their worst day in four months. But make no mistake – the short-term trend remains down.
It’s been a rough start to the week (or an exciting start, depending on your perspective) as a result of reescalating trade tensions between the U.S. and China. On Sunday, President Trump stated that tariffs on $200 billion worth of Chinese imports would increase from 10% to 25%, and that another $325 billion in goods could fall under the 25% tariff “shortly.”
It’s been a busy week so let’s jump right in. We’ll begin today with a brief look at where markets stand, get caught up to speed on the earnings front, and then examine recent trends in the latest economic data.
As earnings season chugs along it’s starting to look like analysts may have tempered their expectations a bit too much during the 4th quarter, which is typical. As you can see in the chart below, actual earnings (blue bars) have a steady habit of coming in above estimates (gray bars).
The rally that has taken hold this year has been very strong, but equally perplexing. As discussed in recent articles, it has come amidst falling earnings expectations, warnings from the bond market, and mixed economic data. In addition, this move higher has come as investors move money out of equities …