Macroeconomic Update – Weekly Outlook (July 23 – 27)
Markets closed with positive returns since they had a positive start due to the strong quarterly results reported by companies along with the optimistic tine by Powell, president of the Fed.
- However, it started losing momentum as Trump stated he was considering in implementing new tariffs to Chinese goods increasing the concerns on trade wars and protectionism
o This also led to the Yuan to depreciate to new low levels
So, this contrast between a solid earnings report from companies and the tension between commercial policies will guide the markets next week.
- Starting with the macroeconomic indicators, they are forecasted to have a positive tone this week.
o Among the main indicators in Europe, PMI & IFO are expected to be lower than the previous months but will hold in good levels
- On Thursday, it will be the meeting of the ECB which is expected just be transition meeting confirming the end of the conventional program of asset purchases at the end of 2018
- Regarding the United States
o On Friday, GDP of the second quarter will be released which is expected to reach 4%
- Hence, this acceleration will confirm the expansive cycle
- Another fact that should support the markets is the quarterly results making this week possibly the year
o 180 companies are reporting earnings this week, and the outlook is positive
- So far, regarding the ones that already have reported, have averaged a earnings growth of 20,8%, slightly above expectations
Due to these strong fundamentals both from the macro perspective and from the earnings report, trade tensions could be placed in the background.
- Nevertheless, on Wednesday Yunker and Trump are meeting.
o Yunker will meet with some proposals regarding the trade deals and tariffs on automobiles
o It will provide some hints on what is the outlook regarding the trade deals of United States with the rest
Hence, it is a week to be patient and hold the long positions in the markets since the macro and fundamentals remain strong and positive.