Earnings season is in full swing this week with numerous reports across a variety of industries. Stocks have, thus far, performed well in July, with the S&P 500 Index up about 100 points to 2,800, near the highest levels of the year. This week, I will be watching three earnings reports closely: Alphabet/Google, Facebook and Amazon. The FAANG stocks have been a key area of strength for the market and the recent disappointing growth numbers from Netflix puts added importance on the other companies’ earnings as a measure of confidence for the overall market.
Fixed income this week sees a new supply of Treasury bonds and the European Central Bank (ECB) meeting as key events. Since global yields increased last week, I will be watching to see if that trend continues, as the impact of currency flows, trade talks and changing monetary policy could have a significant impact on yields.
I think investors need to start taking a more cautious position toward financial asset prices as a result of a changing economic landscape. As the era of easy monetary policy and stable global capital flows comes under pressure, so should financial asset prices.
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