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Weekly Commentary

ND&S Weekly Commentary (5/13/19) – Trade Tensions Escalate

Markets had a rocky week as trade war concerns weighed heavily on investor sentiment. As is it appeared a trade agreement was close, China allegedly walked back on some of their prior commitments resulting in President Trump’s decision to increase tariffs on $200 billion worth of Chinese imports from 10% to 25%. China vowed to take “appropriate countermeasures” which will likely result in additional levies against US exports to China. The trade uncertainty will likely remain a headwind for the market in the near-term as investor expectations adjust to the reality that there might not be an agreement.

For the week, the DJIA lost 1.96% while the S&P 500 gave back 2.10%. The volatile Nasdaq declined 2.96%. Developed international markets were also weak as the MSCI EAFE index dropped 2.59% for the week. Emerging markets lost ground as well with the MSCI EM index ceding 4.51%. Small company stocks, represented by the Russell 2000, were beaten-down by 2.52% for the week. Fixed income, represented by the Bloomberg/Barclays Aggregate, finished the week higher (+0.31%) in a flight to safety. As a result, the 10 YR US Treasury closed at a yield of 2.47% (down 7 bps from the previous week’s closing yield of 2.54%). Gold prices closed at $1,287/oz. Oil prices were flat on the week as oil closed at $61.66.

With 90% of the constituents of the S&P500 having reported for Q1 2019, blended earnings show a less than 1% decline with the same quarter a year ago. Revenues are expected to rise 5.3% year over year, according to FactSet. This week, 13 companies of the S&P 500 index are scheduled to report results.

There will be economic releases on retails sales, manufacturing, housing starts, and consumer confidence in the week ahead. However, most investor focus will be on the US-China trade front as negotiations remain ongoing.

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