How do you spell relief? USMCA.

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Reported fourth quarter earnings growth for S&P 500 companies is 6% year-over-year with 60% of companies reporting.

Investors received some relief from trade worries yesterday after the announcement that Canada has signed on to a new NAFTA trade pact (USMCA – United States-Mexico-Canada Agreement). This will help businesses grappling with ways to modify their operations and supply chains to respond to proposed tariffs. U.S. dairy farmers and domestic auto makers are some of the biggest winners in this deal. Canada agreed to drop its quota system which limits imports of some U.S. dairy products. What’s more, cars with 75% of their components manufactured in North America can escape tariffs. Steel and aluminum tariffs will remain in place for now. The U.S. agreed to a trade deal with South Korea last week and is now turning its attention to Europe and Japan. All of these deals will work to block China and its growing dominance as a global supplier. But the China negotiations are far more complex as they deal with core trade practices involving technology transfer and government subsidized protectionism so the trade angst is not over yet. Investors seem relieved but are still generally cautious. Still, the fourth quarter is usually the best quarter of the year. Earnings season is on tap and its forecasts are for 19% year-over-year growth in profits. Keep your eye on fundamentals.

Please follow market earnings and sales metrics on page 8 of the Global Perspectives Book.

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