August 31, 2018

The major stock market indexes are mixed in early trading (Dow -55 pts; SPX -.13%; Nasdaq +.1%). Retailers, semiconductors and REITs are moving up, but most other groups are in the red. Banks and oil companies are some of the worst-performing groups, and year-to-date they’ve been flattish. Trade volume is pretty light in front of the three-day weekend. European stock markets are down about 1% and Asian markets were down overnight. Over the last 24 hours we’ve seen headlines saying President Trump is leaning toward imposing trade tariffs on another $200bil in Chinese imports, and he’s also doing his part to cast doubt on the trade talks between US and Canadian officials this week. Today is the deadline for negotiating a new NAFTA deal with Canada. That country’s foreign affairs minister said the two sides are “not there yet.” That haze of political uncertainty will keep a lid on stock market gains for now.

Despite this, US stocks fared well in August. The S&P 500 Index is up 3% this month, the Nasdaq is up 5.6% and the Russell 200 Index is up 3.7%. Remember, August is supposed to be one of the weaker months of the year. The consumer discretionary sector shot up over 5% as major retailers like Wal-Mart (WMT), Target (TGT) and Kohls (KSS) at long last are shining again. The tech sector surged over 6% with the FAANG stocks (Facebook, Apple, Amazon, Netflix & Google) leading the charge. Not far behind was healthcare, which surprised Wall Street with much better than expected second quarter earnings announcements. Believe it or not, the beaten-down pharmacy benefit management group (CVS Health, Amerisource Bergen, Cardinal Health) rebounded nicely along with some key biotechs (i.e. Celgene, Biogen) and Big Pharma (Pfizer, Eli Lilly).

Warren Buffett was interviewed on CNBC yesterday. Try though they may, the media can’t seem to get him to say anything negative. “The economy, really since 2009, has progressively gotten better. We’ve had 9 full years of business improvement. Across the board, business is good.” 

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