Money Advice

Wall Street nervous about international problems

Posted by The Simply Money Advisors Team on Aug 13, 2018 4:53:00 PM

International concerns weighed on U.S. markets last week, as Wall Street’s nerves were high due to Turkey’s currency plunging, ‘Brexit’ negotiations stalling, and the trade spat with China not letting up.

On Friday, the Turkish Lira dropped about 14%, partly due to President Trump saying the U.S. would double the tariffs (taxes) on Turkey because they are detaining a U.S. pastor. The reason Wall Street is nervous about the currency tumbling, which as of Monday morning is down about 45% for the year (according to Bloomberg), is that a weaker currency will make it more expensive for Turkey to repay its debt, and much of its debt is held by European banks.

While Brexit negotiations have not been fruitful, talks are scheduled to resume this week. There is an increasing concern there may be ‘hard’ exit, meaning the United Kingdom leaves the European Union (EU) without a deal in place.

The sticking points continue to be the Irish border (Ireland is part of the EU and Northern Ireland is part of the exiting UK), how UK and EU citizens will be treated by one another in terms of working and living arrangements, and how the UK and EU will trade with each other.

If there is no deal by next March, trade between the UK and EU will default to World Trade Organization rules. This would result in highly scrutinized custom checks at borders, causing a slowdown of goods entering and leaving the UK. It also means tariffs would increase for some products, such as farm exports, which would see tariffs of 30-40%.

The important upcoming events are the October EU summit, a possible emergency summit in November or December if no deal is in place, and the actual Brexit itself on March 29, 2019.

In the U.S., the economic data continues to be healthy with economists expecting the economy will grow around 3% in third quarter (July, August, September). This week’s most important economic release will be the report on retail sales, and this matters because consumer spending makes up about 70% of the U.S. economy.

Economists will also be paying attention to reports on manufacturing and housing. Meanwhile, U.S. companies have reported very strong earnings for the second quarter. Earnings are 26% higher (on average) compared to the same time last year due to robust sales and the corporate tax cut. Companies reporting earnings this week include Home Depot, Macy’s, and Walmart.

The Simply Money Point

Stocks have recovered most of their losses since January. Low recession risk and growing corporate earnings in the U.S. have been good news for investors over the past month and should be good news in the long term.

However, higher volatility is possible in the short term as Wall Street turns its attention from earnings to trade tensions with China, Brexit negotiations, and the possibility of less government stimulus depending on the results of the U.S. midterm elections.

Are you confident you’ll be able to retire well? If not, educate yourself on how best to manage your life and money! Visit our Retirement Resources library for free online video tutorials, downloadable guides, and live events.

Take me to Retirement Resources

Topics: Economics, Investing


Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Simply Money Advisors), or any non-investment related content, made reference to directly or indirectly will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, this content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained here serves as the receipt of, or as a substitute for, personalized investment advice from Simply Money Advisors. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Simply Money Advisors is neither a law firm, a certified public accounting firm, nor a tax advisory firm and no portion of the blog content should be construed as legal, accounting, or tax advice. Please consult your own attorney, accountant, and tax advisor for legal, accounting, and tax advice. A copy of the Simply Money Advisors’ current written disclosure statement discussing our advisory services and fees is available for review upon request. Advisory services offered through Simply Money Advisors, a SEC registered investment adviser. Insurance services are offered through Simply Money Insurance Agency, a separate entity from Simply Money Advisors. Simply Money™ and the spiral symbol are trademarks of Simply Money IP Holdings, LLC.

Simply Money Advisors

Your trusted financial planning partner and retirement specialist.

Subscribe to Blog Updates

Recent Posts