Banks Post Mixed Earnings Reports

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PepsiCo’s (PEP) quarterly results were better than expected, indicating the possibility of a gradual recovery in its soda business. PepsiCo’s North American beverage sales fell only 0.9 percent – its smallest drop in four quarters – as the company launched a vigorous marketing campaign to revive soda sales.

Pepsi’s net revenue rose 2.4 percent to hit $16.09 billion, $5.19 billion of which was generated by its beverage business. These figures beat Wall Street’s expectations. In addition, sales at Frito-Lay North America, the company’s biggest business, grew for the entire second quarter, rising 4.3 percent. Much of Pepsi’s growth this quarter can be attributed to their snack foods, rather than their beverages.

While Pepsi’s stronger growth seems to be sustainable, the company still faces rising trucking and commodity costs, which may hamper future growth.

Global Currencies Strengthen

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The U.S. dollar rose to a six-month high against the Japanese yen this Tuesday. The yen, which is generally bought during times of uncertainty,(e.g amongst threats of a looming trade war), did not perform as expected, with the dollar rising up 0.5 percent against the Japanese currency.

Risk appetite is significant in the market as investors increase purchases of emerging market currencies. Several Latin American currencies strengthened – it took 2 percent fewer Mexican pesos to purchase a U.S. dollar. The Brazilian real and Russian ruble also rose, indicating that investors are more confident in purchasing riskier assets.

Mid-Year Outlook

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At the halfway point of 2018, the U.S. stock market presented a total return of 2.7%, with the S&P up 3.08% and the Nasdaq gaining 11.66%. Stronger economic momentum, rising Fed rates, and persisting geopolitical tensions have definitely influenced this figure during the course of the first half.

Tariffs on $34 billion worth of imports from China were instituted on Friday. This emphasized heightening trade tensions between the two world powers. China responded with its own tariffs on U.S. imports such as soybeans, aircraft and cars. While the most likely outcome predicts peaceful negotiations in favor of a trade war, trade anxieties continue to plague the market and increase volatility.

Aside from trade tensions, other factors that will continue to affect the market were summarized in June’s job reports, which spoke to the strength of the labor market. It is expected that the unemployment rate will move lower as the year continues, which should in turn support wage growth. While this is great for consumers, it may push inflation, prompting yet another rate increase from the Fed.