Half Time Wrap Up

Main content

The first half of 2018 is coming to a close on a note of optimism. Markets are rallying today despite continued trade tensions. Trade is not the only issue dogging investors in 1H 2018. A flat yield curve coupled with anticipated Fed rate hikes, a stronger dollar, rising oil prices and a slowdown in European growth are weighing on investment optimism. On the other hand, tax cuts and deregulation are resulting in a surge in GDP, CAPEX, repatriation of profits, business optimism and record high corporate profits. Meanwhile, North Korea has faded into the background. The negatives make headlines while the positives draw yawns. The trade issues with China run deep and will not be resolved anytime soon. Despite the headlines, U.S. allies agree with the U.S. when it comes to China’s blatantly unfair trade practices. Expect the tug of war between trade and robust fundamentals to play out in the markets during the second half of the year. However, news flash, the fundamentals will eventually prevail. If the trade woes start to significantly impede business, it will show up in the earnings. So far, the stealth economic expansion has been revising earnings up, not down. In 2H 2018, investors should 1. Stop trying to front run the ever-changing potential trade outcomes and let the earnings do the worrying for them and 2. Understand that volatility creates opportunities.

Footer content