August 2018
The S&P 500 Index achieved its longest bull market in history, superseding the previous record of 3,452 days that was set during the technology boom of the early noughties. The US reached a new agreement with Mexico on Nafta, but negotiations with Canada remained unresolved.
- The US/China trade dispute rumbled on
- Core CPI rose by 2.4% YoY
- Apple’s market value topped US$1 trillion
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Equity market performance in the US during August was underpinned by strong corporate earnings and sales. The S&P 500 Index achieved its longest bull market in history, superseding the previous record of 3,452 days that was set during the technology boom of the early noughties. Over August as a whole, the S&P 500 Index rose by 3% while the Dow Jones Industrial Average Index climbed by 2.2%. Meanwhile, the technology-rich Nasdaq Index rose by 5.7%, and Apple’s market value topped US$1 trillion during the month.
“Tensions – and tariffs – rose between the US and Turkey”
According to S&P Dow Jones Indices, the best-performing S&P industry sectors over the month were health care and consumer discretionary – which both achieved double-digit growth – followed by consumer staples and information technology. In comparison, the energy sector ended August in negative territory. President Donald Trump revealed that he has asked the Securities & Exchange Commission (SEC) to consider changing the current reporting rules to allow US companies to report twice a year instead of quarterly.
The US reached a new agreement with Mexico on the North American Free Trade Agreement (Nafta), but negotiations with Canada remained unresolved as August drew to a close. Elsewhere, tensions – and tariffs – rose between the US and Turkey, the US/China trade dispute rumbled on, and trade discussions between the US and China ended without making substantial progress.
Although the outlook for the US economy appears generally positive, some Federal Reserve (Fed) policymakers appear dubious about their scope to address a future economic downturn, according to the minutes from their most recent meeting. In particular, members of the Federal Open Market Committee (FOMC) highlighted “consequential” risks created by trade tensions and concerns that an overheated economy could create “inflationary pressures or … financial imbalances that could eventually trigger an economic downturn”. In the near term, however, further monetary tightening is widely anticipated, with the next increase in interest rates expected as early as September.
At the annual Economic Symposium at Jackson Hole, Fed Chair Jay Powell maintained his view that a policy of gradual increases in interest rates remains appropriate, stating: “When unsure of the potency of a medicine, start with a somewhat smaller dose”. He also urged policymakers to look beyond inflation for evidence of excesses. Core consumer inflation rose at an annualised rate of 2.4% during July, posting its fastest year-on-year growth since September 2008.
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