Market Commentary for End of July 2018

Trade Concerns

Trade is threatened by the prospects of escalating trade wars between the US, China, and EU. Tariffs on billions of dollars of goods have already been raised, which would stifle international trade and profits. Thankfully, many of these tariffs do not go into effect for many months, leaving some to postulate that POTUS is using these newly minted tariffs as “bargaining chips” for negotiations to secure bilateral tariff drops. Proof of this theory’s feasibility can be seen in this tweet:

Facebook Pulls Back

Facebook experienced an 18% drop on Thursday as a result of lower outlooks for future quarters, and lackluster user growth figures. The stock dragged on FANG stocks and the NASDAQ as a whole. This brings Facebook’s P/E to a very tempting 24.50.

Chinese Tax Cuts

China has recently introduced a mixture of tax cuts and infrastructure spending, in an effort to prop up demand in their economy during this time of “uncertainty” with the US. This move came on the same day as a $74 billion cash injection into the Chinese banking system by the People’s Bank of China, the largest single day injection of cash ever. These moves show that Chinese officials are worried how trade spats with the US could potentially worsen a slowdown of their domestic growth. Healthy and steady growth is one of major objectives of the Chinese government.

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