 The Market Sum | Insight after the bell
By Caleb Silver, Editor in Chief Friday's Headlines 1. Markets End August on a Flat Note 2. Consumer Spending and Sentiment Diverge 3. Tariffs Arrive on our Shores Sunday 4. September is the Cruelest of Months Markets Closed
Year-to-Date
 Markets Today
We can close the books on August, which has been the most volatile month for stocks all year. The S&P500 fell 2% this month, its worst performance since May when it fell more than 5%.
P.S. I spoke about a lot of these topics on the TDA Network today in case you prefer video.
It may have only been a matter of time, but consumer sentiment is starting to erode. The Univ. of Michigan Consumer Sentiment for August final numbers came in this A.M., and they were much weaker than expected. Sentiment is a tricky thing to quantify while consumer spending is not. Just because a consumer feels shaky about the economy does not mean they will not spend in the coming months. Still, consumer spending is 70% of U.S. GDP, so if spending follows sentiment as it tends to do, an economic slowdown could be hastened. Here is the trend for consumer sentiment, per tradingeconomics.com. We last saw these levels at the beginning of the year after the U.S. stock market corrected. But sentiment improved as the Federal Reserve indicated it would be more accommodative to sustain the economic expansion.  Consumer Spending Remains Strong On the other hand... Consumer spending for the month of July remained strong. According to the Bureau of Economic Analysis, both consumer spending and Disposable Personal Income remained healthy in July. That could be attributed to the fact that July is a heavy vacation month for U.S. consumers, who spent on everything from consumer goods to recreation, travel and vehicles. The Personal Savings rate also increased in July, which is a good sign that consumers felt confident enough to both spend and save.  But, that was before the volatile month of August, which was the most volatile month of the year, to date. The U.S. stocks market saw several 1% or greater swings in addition to a 3% drop last week. While the stock market and the economy are not one in the same, a volatile stock market does have a psychological effect on consumers.
Here Come the Tariffs That was also before this Sunday, when $112 billion worth of Chinese goods will have 10-15% tariffs imposed on them. China plans to counter with 5-10% tariffs on U.S. goods, although the timing on those is uncertain.
This round of tariffs will directly impact consumer goods like clothing and electronics. But there are also hundreds of very obscure products that are targeted in Sunday's round.
Here are just a few of the obscure products that will be impacted, according to the 122 page report from the U.S. Trade representative:
Of course, there are higher ticket items on the list like steel, TV monitors, cameras, aluminum products, and footwear, which is why U.S. companies are warning about passing those increased costs onto their customers.
My recommendation: If you need to purchase your live foxes or canoe paddles, do it on Saturday before the tariffs are imposed.
President Trump accused those companies complaining about tariffs of being weak and poorly run, and blamed the Fed for not cutting rates to boost the stock market.  Fed Chair Jerome Powell is scheduled to make a speech on Friday, and the Federal Open Market Committee (FOMC) meets September 17th on interest rates, so we'll see if the pressure from the President has any impact.
September - The Cruelest of Months Sorry to say, the road ahead does not get any easier. Historically speaking, the month of September has typically been the worst for the U.S. stock market, going back to 1950. According to LPL Financial, the average returns for the month of September are 0.5%. The last decade has bucked that trend with returns of 0.9%, on average. The silver lining is that the past 15 times stocks were lower in August, the rest of the year was actually higher every single time.  Historical anecdotes like these are interesting, but not foundations upon which to build your investment strategy. No one can predict what the next day or month will bring, but it is good to have awareness of seasonal patterns.
What to Expect Next Week Monday is Labor Day, a national holiday here in the U.S. The stock and bond markets are closed, as are most federal offices and banks. We'll be off for the day, but we have a special Market Sum coming your way.
We'll have a close eye on any fallout from the new tariffs going into effect Sunday and any retaliatory measures China may take in their wake. Negotiations between U.S. and Chinese trade representatives are allegedly happening at a "high level", but we don't know what that actually means.
There are a few more corporate earnings trickling in, and we'll be paying close attention to athletic retailer Lululemon on Thursday. LULU has managed to buck the trend of other retailers that are weighed down by tariff concerns, rising 50% so far this year. It's crushing Nike, which has well underperformed the market in 2019.  U.S. Economic Reports In the U.S., there are two manufacturing reports due out on Tuesday which will give us a little more data on business spending. The Purchasing Managers Index and the Institute of Supply Manufacturing Index. These are weekly reports that we typically don't pay too much attention to, but given the increasing drumbeat about a threatening recession, they are important. Both have shown declines over the past several months indicating a trend headed in the wrong direction.
Jobs Report Next Friday On Friday, we'll get the non-farm payrolls report for the month of August. The jobs market has been remarkably strong and wages have been increasing. That said, average hours worked per week has been slipping a little bit. Are businesses cutting back on shifts to reign in costs? Will hiring continue at the 164,000 jobs added monthly average we have experienced over the past several years?
China Manufacturing On Sunday evening (In the U.S.) we'll get a key manufacturing report out of China. Sunday is also the day new tariffs will be implemented on $112 billion worth of Chinese goods. That's just a coincidence, but it will be interesting to hear if manufacturing activity in China continues to slow given the trade war.
Germany's Slowdown On Wednesday and Thursday, we'll get key manufacturing and production reports from Germany. The largest economy in Europe is in the grips of a brutal economic slowdown that might well be a recession. Two of its biggest trading partners, the U.S. and China, are deadlocked in a trade war and the U.K. seems headed for a hard Brexit at the end of October. If Germany continues to slide, it could accelerate a broader global recession sooner, rather than later.
Enjoy the long weekend for those of you who have Monday off. We are back on Tuesday.
chart courtesy www.koyfin.com  Dollar Tree bounced back after selling off yesterday. Campbell Soup's recipe for cost cutting and leaning into snack sales seems to be paying off. The company reported strong quarterly results today, and investors liked the taste.  Shares of Ulta Beauty were crushed today as the company missed its earnings estimates and warned things will get worse before the end of the year. It does have a new line of cosmetics coming out from Kim Kardashian in 2020, so maybe Kim and her 147 million Instagram followers can help.  Word of the Day: Consumer sentiment is a statistical measurement and economic indicator of the overall health of the economy as determined by consumer opinion. Consumer sentiment takes into account an individual's feelings toward his or her current financial health, the health of the economy in the short-term and the prospects for longer-term economic growth.  Warren Buffett childhood photo courtesy: "The Snowball", by Alice Schroeder. Bantam Books 2019
Today in Warren Buffett History August 30, 1930 Legendary investor Warren Buffett is born in Omaha, Nebraska to Leila and Howard Buffett. One of his first investments was the purchase of a pinball machine, which he installed in a local barber shop. He went on to deliver the Washington Post newspaper in his neighborhood, and eventually became a major shareholder in the company. The first stock he ever purchased was Cities Service, an oil services company. In 1965 he assumed control of a textile manufacturer called Berkshire Hathaway, and, well... you know the rest. Today, Buffett is one of the wealthiest people in the world, and has pledged $25 billion to the Bill and Melinda Gates Foundation, to date.
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Friday, August 30, 2019
So Long, Summer
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