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Market Comment August 2018

Handy list of companies with high exposure to China:

The US is reportedly planning to raise its proposed tariff on Chinese imports to 25% from 10%. If trade tensions between the two countries worsen, companies with high sales exposure to China would be at risk, Goldman Sachs' equity strategists said.

Trump China trade war: Stocks most at risk, according to Goldman Sachs - Business Insider


The stock market’s new buzzy number is $1,000,000,000,000. And after one prominent tech giant hit that market-value milestone last week, the 13-digit figure may hold a different level of resonance for the broader market in terms of share buybacks. Indeed, analysts at Goldman Sachs project that stock repurchases will reach $1 trillion this year, up 46% from 2017 on the back of tax reform and strong corporate cash flows. And investors are likely to see immediate the impact of those repurchases as August tends to be the most popular month for buybacks. The month usually accounts for 13% of such deals for the year, Goldman says.

Stock market to get $1 trillion boost via buybacks, says Goldman - MarketWatch


Companies in the S&P 500 Index reported a 24 percent year-on-year increase in capital spending in the second quarter, the fastest since 2011, according to Bank of America Merrill Lynch. More comprehensive government numbers paint a similar picture. Business investment rose by 11.5 percent in the first quarter of this year from the preceding period and 7.3 percent in the second.

Breakingviews - Investment gives U.S. market, economy fresh legs | Reuters

Remarkable, and reason for us to get a little more optimistic, as we set out in the following article:

We might have been too pessimistic about the impact of the tax cuts on the economy. New data about business investment and productivity growth paint a better picture; even if it's a little soon to argue, a new trend has been established. Business investment and productivity growth are especially important to investors, as a material uptick in these allows for the bull market to continue running.

The Bull Market Can Run For Years | Seeking Alpha



A really underappreciated fact:

The Fed’s policies may not have been as loose as they appeared. On a nominal basis, interest rates were indeed cut to historical lows. But what mattered is whether they were low after adjusting for inflation. It appears corporate borrowers did not get a huge break from the Fed: During the latest bull market, the yield on corporate bonds rated BAA by Moody’s (a good and historical proxy for average corporate borrowers) was 3.7 percent on average, after adjusting for inflation. That compares with an average of 4 percent since 1950.

The Stealth Drivers of the Record Bull Market - The New York Times


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