Last Week:

March sends markets lower. Three of the major averages are now negative for the year through Q1.

Tech stocks were the reason. Yes, you can point to the Trump tariffs as part of the reason. But tech stocks, specifically Facebook, have caused a lot of the downturn as well. I think we are all familiar with Facebook’s privacy issues by now. That stock is now solidly below its 200-day moving average (a significant thing). And from my view that’s impacted the rest of the FANG stocks (Facebook, Amazon, Netflix, and Google). Add in Apple. No, those four stocks aren’t having the same difficulties as Facebook, but their charts are down in a similar fashion. Why is that important? Amazon, Apple and Google… just three stocks combined… represent 10% of the S&P500. When three super important stocks all go down in value together, it affects the rest of the market.

Don’t lose heart. Three reasons. First, corporate profits are good and expected to stay that way. Second, the 10-year rate hasn’t gone above 3.0% (currently at 2.74%). Third, the U.S. dollar remains stable.

We got the final read on the Q4 2017 U.S. GDP last week. It surprised… in a good way. The first read came in at +2.6%. The second read came in at +2.5%. The final read was expected to move upward to +2.7%. But it came in at +2.9%. Think about that: Q2 was +3.1%; Q3 was +3.2%; and Q4 was +2.9%. That means over the last three quarters we’re averaging over +3.0%. It’s been quite a long time since that’s happened. This is great news.

Did you know the same U.S. car purchased here, cost 30-35% more in Europe. First the EU slaps a 10% tariff (tax) on it. Then each country hits it with a VAT (value added tax). Germany’s is 19%. France’s in 20%. Italy’s is 22%. Norway’s and Sweden’s is 25%. So, a $30,000 U.S. car costs: $38,700 in Germany; $39,000 in France; $39,600 in Italy; and $40,500 in Norway and Sweden. What’s the current U.S. tariff for foreign vehicles? Just 2.5%. Does that sound like a level-playing field to you?

This Week:

The economic focus of the week: It will come on Friday morning when we get the latest jobs and unemployment numbers. Last month we got 313,000 new jobs. We’re only expecting 167,000 this month. The U3 unemployment rate is expected to drop from 4.1% down a tick to 4.0%.

Indicator focus: February’s construction spending, March’s ISM manufacturing index (Mon); March’s motor vehicle sales (Tue); February’s factory orders, March’s ADP employment report, ISM’s non-manufacturing index (Wed); February’s international trade (Thu); and March’s jobs and unemployment numbers (Fri).

Have a great week,


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