Global Market Commentary

Business Spending and Consumer Spending Are Strong

//
Posted By
/
Comment0
/
Categories, ,

Market Summary

The U.S. Economy

U.S. economic data for the second calendar quarter came out yesterday, and they were very strong. According to the latest revision, U.S. GDP grew by 3% in the quarter, and was far above the estimates of almost all economists. For the third quarter, the most accurate predictor of U.S. economic growth, the Atlanta Fed’s Nowcast, is calling for 3.4% GDP growth in the third quarter. In spite of Hurricane Harvey, we anticipate strong growth in Q3 2017.

Business spending and consumer spending are strong, and this bodes well for corporate profits and for stock prices. We are not shocked to see that even in the seasonally tough period of August and September, the U.S. stock market is holding up well.

U.S. Markets

U.S. stocks are uneven. Some market sectors are doing very well and others, especially small-cap and value stocks, are doing very poorly. As we have been pointing out for months, large growth stocks, especially in disruptive technological areas, are in demand, and we continue to favor them. We have repeatedly recommended Alphabet [NASDAQ: GOOG], Facebook [NASDAQ: FB], Apple [NASDAQ: AAPL], and others. We also see that biotechnology stocks are regaining their momentum in the wake of some high-profile M&A and drug approval news.

Videogame stocks are moving higher with solid growth and exceptional demand.

We also note that financial technology stocks like Mastercard [NYSE: MA] and Visa [NYSE: V] are acting well, while financial and bank stocks in general are not acting well.

Industrial electronics and semiconductors are other areas of strength. Areas of weakness continue to include retailers, finance, and oil.

Europe, the U.S. Dollar, and Emerging Markets

In our opinion, Europe remains neutral, and as long as it is not attractive, it will not be a destination for investment money at this stage. Emerging markets have done well, and should continue to attract capital.

Emerging markets including China, Singapore, Hong Kong, Taiwan, India, and others which are manufacturing bases will continue to do well. On the other hand, in our view, countries that are predominantly raw-material producers are not attractive. The U.S. dollar, which may fall longer term, is close to beginning an oversold rally in the next few weeks that will create pressure on commodity prices.

Gold

Gold has moved to $1,300 plus as we expected, and we are still bullish on gold, with one caveat: if the dollar strengthens, it will make it hard for gold to move rapidly higher, and gold could experience a correction. We are watching gold and the dollar closely, and will keep readers informed.

Please note that principals of Guild Investment Management, Inc. (“Guild”) and/or Guild’s clients may at any time own any of the stocks mentioned in this article, and may sell them at any time. Currently, Guild’s principals and clients own GOOG, AAPL, and FB. In addition, for investment advisory clients of Guild, please check with Guild prior to taking positions in any of the companies mentioned in this article, since Guild may not believe that particular stock is right for the client, either because Guild has already taken a position in that stock for the client or for other reasons.

Thanks for listening, we welcome your calls and questions.

Related Market Commentary


Guild Investment Management

Fully discretionary investment portfolio management

LEARN MORE