Weighing the Week Ahead: Will the North Korea Threat be the Catalyst for a Market Correction?
In a normal, quiet summer week we would be lazily considering consumer confidence and the Fed minutes. Instead, the escalating war of words between the U.S. and North Korea has claimed the agenda. Expect many to be asking,
Will the North Korea threat be the catalyst for a market correction?
Last Week Recap
My notion that last week would feature a discussion of revised price targets was pretty good — for exactly one day! Global tensions claimed the attention of markets. Anyone looking for a reason to sell suddenly had one. This occurred despite good earnings and generally positive economic data.
The Story in One Chart
I always start my personal review of the week by looking at this great chart from Doug Short via Jill Mislinski. She notes the overall decline of 1.43% for the week. With Thursday’s big decline, the sequence of down days, and the accompanying headlines, it probably seemed like more.
Doug has a special knack for pulling together all the relevant information. His charts save more than a thousand words! Read the entire post for several more charts providing long-term perspective, including the size and frequency of drawdowns.
The Silver Bullet
As I indicated recently I am moving the Silver Bullet award to a standalone feature, rather than an item in WTWA. Last week’s deserving winner was Aaron Brown for an excellent analysis of the need for context in reading chart. The article also has a link to past winners and their work. I have another great candidate in mind. I hope that readers and past winners will help me in giving special recognition to those who help to keep data honest. As always, nominations are welcome!
Each week I break down events into good and bad. For our purposes, “good” has two components. The news must be market friendly and better than expectations. I avoid using my personal preferences in evaluating news – and you should, too!
The economic news last week was generally positive.
- Mortgage delinquencies are at a ten-year low. (Calculated Risk).
- JOLTS report shows continuing strength in the labor market. This is not the best way to estimate overall job growth, although that is the typical interpretation. More importantly, check out the quits rate, (Washington Center for Equitable Growth).
And also, the Beveridge Curve, an indicator of where we are in the business cycle. (BLS)
- Wholesale inventories were slightly higher than expected. The skeptical Steven Hansen (GEI) notes the decrease in the moving average and the recessionary level of the overall series.