August 12, 2019

In this week’s recap: China jolts the markets by devaluing the yuan, aggregate second-quarter earnings top analyst projections, and stocks retreat for the week.

THE WEEK ON WALL STREET

Stocks spent much of last week rebounding from a Monday drop that reflected nervousness about the U.S.-China trade fight. By Thursday’s closing bell, the S&P 500 had regained all its Monday losses, but it descended again on Friday.

The three big U.S. equity benchmarks finished the week lower: the S&P declined 0.46%; the Dow Jones Industrial Average, 0.75%; the Nasdaq Composite, 0.56%. A broad index of foreign shares, the MSCI EAFE, lost 0.95%.1,2

China Devalues Its Currency

Last Monday, stocks fell 3% in reaction to the overnight weakening of the Chinese yuan. A weaker yuan makes Chinese exports cheaper for buyers who pay for them in dollars.

Critics quickly accused China of manipulating its currency to strike back at the U.S. The federal government plans to impose tariffs on nearly all Chinese products next month, likely making those goods more expensive to American consumers; a weaker yuan could counter the effect of those import taxes.”3,4

Earnings Season Update

Ninety percent of S&P 500 firms have now reported second-quarter results. Their collective sales and profits have surprised to the upside.

Stock market analytics firm FactSet says that overall earnings have beaten estimates by 5.7%. Seventy-five percent of firms have reported actual earnings per share surpassing estimates, which is better than the five-year average.5

FINAL THOUGHT

We are seeing a significant bond rally this summer, even with interest rates at very low levels. (When bond prices rise, bond yields tend to fall.) At the moment, about a quarter of the global bond market is invested in government notes with negative interest rates. The 10-year Treasury stands in contrast. Friday, it was yielding 1.74%.6,7

Tip of the Week

If you think you need to save more for retirement, think about saving at a rate that is slightly above your “comfort zone.” This calls for some financial discipline and dedication, but your future self may thank you years from now.

THE WEEK AHEAD: KEY ECONOMIC DATA

Tuesday: The July Consumer Price Index appears, reporting the country’s monthly and annual rate of inflation

Thursday: July retail sales numbers from the Census Bureau.

Friday: The initial August University of Michigan Consumer Sentiment Index presents the latest snapshot of household confidence in the economy.

Source: Zacks, August 9, 2019
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Any investment should be consistent with your objectives, time frame, and risk tolerance. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.

THE WEEK AHEAD: COMPANIES REPORTING EARNINGS

Monday: Sysco (SYY)

Wednesday: Cisco (CSCO)

Thursday: Alibaba (BABA), Applied Materials (AMAT), Nvidia (NVDA), Walmart (WMT)

Friday: Deere & Co. (DE)

Source: Zacks.com, August 9, 2019
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Any investment should be consistent with your objectives, time frame, and risk tolerance. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.
Quote of the Week

Dignity does not come in possessing honors, but in deserving them.”

ARISTOTLE

Riddle of the Week

You write the word one on a piece of paper. An observer tells you she can make one disappear by adding something to it. Is this true, and how can she do it?

LAST WEEK’S RIDDLE: What two things will you never be able to eat at dinner?

ANSWER: Breakfast and lunch.

Valley Oak Wealth Management can be reached at 415.898.4439 info@valleyoakwm.com or ValleyOakWM.com

Know someone who could use information like this?

Please feel free to send us their contact information via phone or email. (Don’t worry – we’ll request their permission before adding them to our mailing list.)


Tim Russel is a Wealth Advisor with, and securities offered through, LPL Financial member FINRA/SIPC
This material does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results.  Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.
CITATIONS:
1 – wsj.com/market-data [8/9/19]
2 – quotes.wsj.com/index/XX/990300/historical-prices [8/9/19]
3 – bloomberg.com/news/articles/2019-08-04/asia-stocks-set-to-drop-with-trade-back-in-focus-markets-wrap [8/5/19]
4 – bloomberg.com/news/articles/2019-08-05/china-hits-back-at-trump-with-weaker-yuan-halt-on-crop-imports [8/5/19]
5 – insight.factset.com/earnings-season-update-august-9-2019 [8/9/19]
6 – cnbc.com/2019/08/07/how-bonds-with-negative-yields-work-and-why-this-growing-phenomenon-is-so-bad-for-the-economy.html [8/7/19]
7 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield [8/9/19]
CHART CITATIONS:
wsj.com/market-data [8/9/19]
quotes.wsj.com/index/SPX/historical-prices [8/9/19]
treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield [8/9/19]
treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yieldAll [8/9/19]