The Week on Wall Street
Stocks rose last week, with help from two developments: the announcement of further U.S.-China trade talks as well as August hiring and manufacturing numbers that seemed to bolster the argument for a rate cut by the Federal Reserve.
FACT OF THE WEEK
Each fall, many birds prepare for the winter season, some prepare for long migrations, one including an 11,000-mile journey by the Arctic Tern.
Other non-migratory birds such as the black-capped chickadee survival depend heavily on food-caching, will begin physical transformations as their hippocampus enlarges by 30%, amplifying their spatial memory to remember where it collected food.
The broad U.S. equity market, as represented by the S&P 500, added 1.79% during a 4-day trading week. The Dow Jones Industrial Average improved 1.49%; the Nasdaq Composite, 1.76%. Foreign shares tracked by the MSCI EAFE index gained 1.69%.
Trade Talks Poised to Restart
Trade representatives from the U.S. and China are planning to head back to the negotiating table early next month. This news came Thursday from China’s ministry of commerce, which confirmed a verbal agreement among Secretary of the Treasury Steven Mnuchin, U.S. Trade Representative Robert Lighthizer, and Chinese Vice Premier Liu He.
Formal trade discussions between the U.S. and China last happened in July. China has said that it wants punitive U.S. tariffs on its products removed in the event of a deal.
Weaker Hiring & Manufacturing Data
Payrolls expanded with just 130,000 net new jobs in August, according to the Department of Labor; 25,000 were temp jobs linked to the federal government’s 2020 Census. The main jobless rate stayed at 3.7%. The U-6 rate, which measures both unemployment and underemployment, rose 0.2% to 7.2%.
A key gauge of U.S. factory activity, the Institute for Supply Management’s manufacturing purchasing manager index, fell to 49.1 in August. A number below 50 indicates factory sector contraction. Some investors took these hiring and manufacturing reports as hints of a slowing economy, one which the Federal Reserve could potentially try to stimulate with an interest rate cut.
August inflation data arrives this week, and if looks especially mild, it may amount to another suggestion that the Fed should ease. The European Central Bank concludes a meeting on Thursday, and Fed officials will certainly pay attention to its latest policy statement.
FINANCIAL STRATEGY OF THE WEEK
Should I invest in the company I just heard about?
Online financial forums and social media make it easy for investors to share portfolio ideas. Many researchers, though, believe such transparency contributes to a herd mentality in investing, as people opt to buy or sell based on how others are trading.
The problem: Herd investing can lead to poor returns. Sometimes, the questionable advice comes from the talking heads on financial media programs.
In one recent study, researchers examined the stock prices of nearly 7,000 companies after their CEOs appeared on CNBC. They found that investors bought those stocks on the day of the interview, driving the prices up, only to see the prices drop in the ensuing trading days.
Before investing, make sure you have done your due diligence and are using a logical investment process instead of following emotional drivers.
As always, please contact my office with any questions or financial concerns you may have.