Caution: Speed Bumps Ahead

MICHELLE SMALENBERGER, CFP®

Fasten your seatbelts for bumps ahead!  Let’s review some of the main stories driving market activity this week.

CORPORATE EARNINGS:

Companies have reported strong earnings which have continued to push up stock prices.  Large gains from companies like Boeing, Ford, Verizon, and AT&T, among many others have reaffirmed confidence in their stock.

Amazon was a company to report higher earnings this past Thursday.  However, the market didn’t like that their bottom line profit was lower than desired.  Amazon historically hasn’t been and still isn’t concerned with their profit numbers as they continue to venture into new areas of business, increasing their spending.

POLITICS:

In the last 24-48 hours we have seen strong efforts by politicians in the Senate to finalize health care reform efforts.  Again to no avail.  It seems they keep moving closer and closer to agreement towards a final solution.  We are optimistic this momentum will present a finalized version that gets all the votes needed soon.

Lesser known is how busy the House of Representatives has been passing legislation.  Even though some have been minor legislative pieces; they have been able to make much progress. “The Republican-led House has passed 158 bills, making it the most productive in the modern-era,” according to House Speaker Paul Ryan and House Majority Leader Kevin McCarthy.  http://www.washingtontimes.com/news/2017/jun/10/president-trump-has-signed-more-bills-into-law-tha/

You may have read yesterday that the hope for a Border Adjustment tax (BAT) being added to tax reform is not going to happen.  Essentially this would have taxed imports but let exports go untaxed.  Here’s an article that explains the details more in-depth and the reasons those in opposition did not like this provision:   https://finance.yahoo.com/news/republicans-kill-border-tax-192050107.html.

House Speaker, Paul Ryan who was a champion of the Border Adjustment Tax, was willing to drop this provision in the name of gaining a consensus and agreement to still pass meaningful tax reform this year.  The BAT would have provided additional revenue to pay for other tax cuts, so work still exists to put together a reform all legislators can get behind and pass.

Passing tax reform would undoubtedly provide a continued stimulus for stock growth to continue.  And there is a shared vision for getting tax reform completed.

GEOPOLITICAL:

Always lingering in the backdrop of how our economy is doing is the risk of geopolitical tension.  North Korea continues to be a threat to many countries with its continued expansion of missile testing.

We still feel encouraged by the hard data that has been reported this past week.  It is these hard data reports that confirm what we “think” is happening in the economy.  Next week will bring another round of economic and company earnings reports.

During these times of volatility, short-term trading can drive the market in different directions from day to day.  It’s important to keep a diversified portfolio so you don’t have to make knee-jerk reactions to economic, political, or geopolitical news.  Stay buckled up for the coming week!