We advocate sticking with a pro-growth investment stance...
The devastation caused by Hurricane Harvey dominated the news last week. From an economic perspective, damage to the region’s energy infrastructure is likely to cause local disruptions and contribute to a temporary increase in gasoline prices. But we expect the broader economic and market effect to be limited. Equity prices rose for a second straight week, with the S&P 500 Index up 1.4%. Health care, technology and industrials led the way, while financials and bond proxies such as telecommunications and utilities fared the worst.
Read an excerpt of the complete commentary below, or download the complete commentary as a PDF.
Key Points:
- Economic damage from Hurricane Harvey may cause near-term disruptions, but the broader effect should be limited.
- We see several risks investors should monitor, but expect rising corporate earnings should push stock prices higher.
- As such, we advocate sticking with a pro-growth investment stance.
Congress will likely pass a massive supplemental spending bill to help fund hurricane relief efforts. Politically, the most interesting aspect may be whether the spending bill will also include language that increases the debt ceiling and a continuing resolution to fund the government. Should these elements be included, it would likely lessen the chances of a disruptive budget fight.
Equity market risks appear skewed to the upside. Persistently low volatility and the slow, if uneven, climb in prices suggest the stock market may be overdue for a correction. But we believe additional corporate earnings and profits growth should be boosted by improving manufacturing, solid jobs growth, increased capital spending and better and more synchronized global growth This should help equity prices.
But several risks could derail markets. Our list includes: 1) economic or earnings deterioration, 2) failure to pass tax reform, 3) a mistake in monetary policy, 4) a housing slowdown, 5) debt ceiling stress or a government shutdown, 6) escalating tension in North Korea, and 7) technical deterioration in the markets
Download Nuveen Asset Management's latest commentary, or read a previous post from Nuveen Weighs Effect of Political Uncertainty on Stocks.
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