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June 1, 2019

Wall Street has had a one-track mind for the month of May. It has focused primarily on the various tariff threats in the ongoing U.S.-China trade dispute, despite positive earnings announcements and big-name initial public offerings which seemed to matter little. The concern was about how consumers and corporations might be affected by higher import taxes in future quarters. News on tariff increases from 10% to 25% on $200 billion worth of Chinese products coming to the U.S. had the biggest effect.

While the proposed new taxes and tariffs might take months to implement, investors reacted negatively to this information, perceiving that trade talks were stalled. A few weeks ago, market watchers noted the huge number of initial public offerings anticipated for 2019 without much market interest.

As new chapters in the U.S.-China trade drama continue to unfold, remember that your investment approach is built around your long-term objectives and risk tolerance. There will always be day-to-day and month-to-month price changes. There will always be breaking news alerts. The disciplined, long-term investor stays the course through the ups and downs.

The first-quarter earnings announcements is almost complete, as more than 90% of S&P 500 companies have reported actual Q1 results. Stock market analytics firm FactSet notes that 76% of these firms have beaten consensus earnings-per-share estimates. Overall earnings for S&P 500 components have surpassed expectations by 5.4%. Both these percentages are above 5-year averages.

The market is quite sensitive to trade developments at the moment, and it is unclear whether this will be a short-term trend or a long-term influence on prices. While the U.S. prepares its next moves, China also is preparing its response to any new U.S. tariffs, which could include manipulating its currency.

Despite a down month, year to date the Dow, S&P 500 and NASDAQ remain positive at 6.38, 9.78 and 12.33 percent, respectively, while the 10-year Treasury is yielding 2.22 percent.