Investor sentiment was impaired during August by concern over North Korea’s relationship with the international community and worries about the impact of Tropical Storm Harvey, which hammered the US Gulf Coast. Looking ahead, Congress has to negotiate the US debt ceiling; if an agreement cannot be reached, the US government could be forced to shut down.
- The technology sector enjoyed a strong August
- President Trump’s relationship with high-profile US business leaders soured
- Fed Chair Janet Yellen called for current banking regulations to remain broadly intact
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Although US indices ended August in broadly positive territory, equity markets are being supported by “fundamentals and a deaf ear to politics”, according to S&P Dow Jones Indices . The Dow Jones Industrial Average Index rose by 0.3% during August, while the S&P 500 Index crept 0.1% higher. Technology enjoyed a strong month during August, and the technology-rich Nasdaq Index rose by 1.3%.
“The second-quarter corporate earnings season ended in positive style”
Investor sentiment was marred by North Korea’s increasingly fraught relationship with the rest of the world, which culminated in North Korea’s decision to fire a missile over Japan. In response, the US warned, “North Korea poses a grave and growing direct threat to the US, Japan, and the Republic of Korea, as well as to countries around the world”. Confidence was also affected by the impact of Tropical Storm Harvey, which battered Texas and the US Gulf Coast. Elsewhere, President Trump’s relationship with US business leaders soured during August as corporate leaders forsook his Manufacturing Council following unrest in Charlottesville, Virginia.
The best-performing S&P industry sectors over the month were information technology, utilities and health care; the worst-performing sectors were energy, telecommunications services and consumer discretionary. The second-quarter corporate earnings season ended in positive style: within the S&P 500 Index, 352 issues exceeded their earnings estimates, 47 met their estimates and 101 missed their estimates. According to S&P Dow Jones Indices , information technology had the best earnings record in Q2, followed by health care. At the other end of the spectrum, real estate and energy had the worst earnings season.
The US economy posted annualised growth of 3% during the second quarter of 2017, compared with previous estimates 2.6%. Growth was boosted by stronger investment and personal consumption. The economy grew by 1.2% during the first three months of the year. Looking ahead, Congress has to negotiate the US debt ceiling; if an agreement cannot be reached, the US government could be forced to shut down.
Federal Reserve (Fed) Chair Janet Yellen called for current banking regulations to remain broadly intact, despite President Trump’s desire to change them. Ms Yellen said, “The core reforms we have put in place have substantially boosted resilience without unduly limiting credit availability or economic growth”. Ms Yellen’s tenure as Fed Chair is set to end early in 2018 , and there is already speculation about the identity of her successor.
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