The economic outlook remains good. Macroeconomic data (jobs, income) and company news (sales revenues) point to continued demand. Growth is slowing and should be slowing, as the US tax cut sugar high fades and as Europe's economic cycle matures. Investors should not be concerned about slowing from above-trend growth to normal growth.
Investors face trade uncertainty. Taxing trade hurts equities a lot more than it hurts the real economy. US economic adviser Kudlow sounded upbeat on the prospects for a China-US trade deal. US economic adviser Hassett suggested China could be evicted from the World Trade Organization. Market uncertainty about trade taxes is not calmed by this.
UK Prime Minister May has talks in Brussels. The attempt at a vote of no confidence in May appears to have failed. The DUP (which supports the government) has said they cannot support the current deal to leave the EU. The legal default is that the UK leaves next March with no deal. We think a deal will happen.
The economic calendar has little to divert attention from market moves and trade talk. German Chancellor Merkel is speaking. There are UK public finance numbers and US consumer sentiment and durable goods data.