TRADE, SMALL BUSINESS SENTIMENT AND THE FOMC

An argument can be made the proverbial buy on rumor and sell on fact phenomena could occur following the agreement of any trade deal. Yesterday the “New NAFTA” was agreed upon and the markets had little reaction. Can we make the assumption that the averages will trade lower if Phase I of the trade deal with China is agreed upon? I can answer yes.

Radically changing topics, sentiment among small businesses climbed the most in more than a year as more owners said profit trends are looking up and that it is a favorable time for expansion. This subsector of “a good time to expand” is at the highest reading in the 46 year history of this indicator.

Small business hiring remains robust as 61% of respondents reported hiring or trying to hire, an increase of 1 percentage point though 53% reported few or no qualified applicants for the positions they were trying to fill.

During the last era of 4% annual growth which occurred during the second Clinton Administration, 90% of job creation occurred by small businesses, defined as companies that employ less than 400 people.

Yesterday’s statistics was another data point that confirms job creation will remain robust as the transition of money and economic activity returns back to Main Street from Wall Street.

Today is the conclusion of a Fed meeting. Will the Committee draw a similar conclusion? Commenting further about the meeting, no change in monetary policy is expected and as in typical fashion all will focus on the post meeting statement.

To write the incredible obvious, the post meeting statement can affect today’s market close.

Last night the foreign markets were mixed. London was down 0.13%, Paris down 0.01% and Frankfurt up 0.35%. China was up 0.24%, Japan down 0.0% and Hang Sang up 0.79%.

The Dow should open flat ahead of the Fed meeting and lingering uncertainty over trade. The 10-year is up 5/32 to yield 1.83%.

 

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