Last Week:

  • U.S. equities finished positive for the week: The Dow Jones Industrial Average (Dow) gained 121 points, or rose 0.5%, to 25,790. The Standard & Poor’s (S&P500) index increased 25 points, to 2,875. The Nasdaq closed 1.7% higher at 7,946, while the 10-year Treasury ended the week at 2.83%.
  • Fed Summit In Jackson Hole: Last week, Fed officials attended the annual Kansas City Fed Symposium where Federal Reserve Chairman Jerome Powell defended the current path of gradual rate hikes. Powell argued that, with a strong U.S. economy, historically low unemployment, and firming inflation, the two risks facing the Fed are “moving too fast and needlessly shortening the expansion, versus moving too slowly and risking a destabilizing overheating,…with the current path taking seriously both risks.” Currently, the odds of a rate hike at the Federal Open Market Committee meeting in September are close to 100%, with 55-60% chance of a hike in December. At the next Fed meeting, investors will be uber-focused on the language surrounding the Fed’s monetary policy stance (accommodative vs neutral) and further clarity around the balance sheet.
  • Preview of the “new NAFTA Deal”: Earlier this morning, officials from the U.S. and Mexico held a joint press conference where they announced a new United States – Mexico bilateral trade agreement, which revises key portions of the 24-year old North American Free Trade Agreement (NAFTA). At this time, Canada has not been involved in discussions, with expectations that once the U.S. and Mexico came to a deal, they would come to the table. While it appears Mexican President Enrique Pena Nieto is hoping to reach a trilateral trade agreement including Canada by the end of this week, President Trump appears to be pursuing a separate bilateral deal with Canada.Some of the key changes include updates to the pact to account for technological changes, such as the internet and the digital economy, as well as changes to bring more automobile production back to the United States. In the new bilateral deal, to qualify for zero tariffs under NAFTA, car companies would be required to manufacture at least 75% of an automobile’s value in North America (vs up to 62.5% in current NAFTA). In addition, the companies will be required to use more “local steel, aluminum, and auto parts, and have at least 40% of the auto content made by workers earning at least $16 an hour.” At this point, we are still waiting on more details surrounding changes to the agreement and updates on negotiations with Canada; however, investors should remember that any changes to the original NAFTA deal would require congressional approval to go into effect.

Look Ahead:

  • Second quarter earnings will continue to wind down this week, with earnings releases expected from Campbell’s Soup, Dollar Tree, Dollar General, and Lululemon among others.
  • On the economic calendar, it will be a relatively slow week. Notable data releases include U.S. advance goods trade balance and inventories, Case-Shiller home prices, and a second look at second quarter Gross Domestic Product (GDP) in the U.S. Abroad, we will see M3 money supply for the Euro-zone, economic confidence numbers, and Chinese Industrial profits numbers.