Donald Trump and his sparring partner Kim Jong-un have seriously added to the infamous wall of worry that stock markets climb but they’re not encouraging much ascension right now. That said, this madcap pair haven’t added anything more worrying overnight, so stocks sneaked higher.

But the whole market direction thing has been clouded by non-nuclear numbskull rhetoric.

You see, Wall Street got distracted overnight by a low US inflation reading that has got market smarties thinking this might delay the Fed’s next interest rate rise.

US inflation was up 0.1% in July, rather than the 0.2% expected by economists, which made a lot of players say “no rate rise in September.” Also, the chance of a December rate rise has fallen from 45% to 38%.

No one can be complacent about “The Donny and Kimmy Show” but if rate rises are being slowed down for inflation reasons, and delaying the eventual recession that will generally come from higher rates, then this bull market could easily last longer than we’ve been guessing.

In addition, US reporting season has been a ripper, which tells me if the North Korean hot spot can be cooled down, then the environment for stocks is pretty damn cool.

“North Korea gets the headlines, but don’t forget that we are closing the door on a very impressive earnings season,” said Ryan Detrick, senior market strategist at LPL Financial. “This will be the first back-to-back double digits earnings growth since late ’11, but just as impressive has been that this is a global recovery in earnings.” (CNBC)

AMP’s Shane Oliver gave us the actual numbers on Friday and this is what he said: “US June quarter earnings reporting season is now 90% done, with 78% beating on earnings, 68% beating on sales and earnings up around 11% year on year.” And the good company news didn’t end there, with “growth seen in the June quarter even stronger in Europe at 35% year on year and Japan at 37% year on year.”

A lot of this vindicates my optimism, which occasionally gets questioned. Putting this altogether, we could be looking at another buying opportunity.

At home, the S&P/ASX 200 Index took about $20 billion off our market cap, with a 1.2% slump on Friday to finish at 5693.1, which means the 5670 level was able to hold again. That’s a good sign but war talk over the weekend can’t be ruled out and could easily unsettle our market on Monday.

If the US-North Korean conversations are more calm in coming days, we could see a higher stock market on Monday, with a very important local reporting season week ahead, with the likes of Telstra doing its most anticipated show-and-tell.

Some 60 companies report next week, including Bendigo Bank, Ansel and JB Hi Fi on Monday; GPT on Tuesday; Westfield, Origin, Fairfax, Seek and Woodside on Wednesday; and Wesfarmers, QBE and Telstra on Thursday.

Back to the week that was and I’m sure if it wasn’t for the Donny-Kimmy war of words our market would’ve been up, with the Index down only 0.5% for the week, with the “in-trouble” CBA providing the brightest spot, reporting a solid $9.9 billion profit.

Taking second prize was IOOF, which saw its share price spike, despite a 16% profit drop. It was its funds under management that excited the market, with inflows of funds up $976 million being the huge story. Thirty-three new advisers trucked in close to $1 billion worth of funds and the market liked those bananas.

Here’s Oliver’s take on our companies’ reportings so far: “It’s early days in the June half earnings reporting season as only 25 or so major companies have reported, but so far it’s been mixed – 45% of results have exceeded expectations, which is around the long-term norm of 44%, but 72% have reported profits higher than a year ago and 82% have increased dividends from a year ago.

But reflecting the mixed results so far, 50% of companies have seen their share price outperform the market on the day they reported and 50% have seen underperformance. It’s worth noting though that there is a tendency for the quality of results to tail off a bit as the reporting season proceeds.

Consensus earnings expectations for 2016-17 have been revised down by 0.4% to 17.7% over the last week but mainly due to resources stocks.”

What I liked

• The NAB business conditions index rose from +14.0 points to a 9½-year high of +15.0 points in July. The business confidence index rose from +8.4 points to +11.7 points.
• Job ads rose for the fifth straight month, up by 1.5% in July to 177,879 ads – a near 6½-year high. Job ads are up 12.8% on a year ago.
• Total new lending commitments (housing, personal, commercial and lease finance) rose by 8.3% in June to $73.6 billion – a 7-month high. Commitment are up 15.6% over the year.
• Commercial finance rose by 13.7% in June to be up 29.6% on a year ago.
• The number of loans (commitments) for budding homeowners (owner-occupiers) rose by 0.5% in June. The value of all home loans rose by 0.8% in the month.
• The value of new loans for owner-occupiers and investors to build new homes rose by 11.1% in June to a record high of $3.31 billion.
• US wholesale inventories rose by 0.7% in June. US non-farm business productivity rose 0.9% in the June quarter. Hours worked by all persons rose 2.5%, the biggest increase in six quarters.
• The NFIB business optimism index rose from 103.6 to 105.2 in July. The JOLTS job openings index rose from 5.702 million to 6.163 million in June. And chain store sales in the latest week were up 2.7% on a year ago.
• The employment trends index in the US rose from 132.42 to 133.77 in July. Consumer credit rose by US$12.4 billion in June (forecast US$15.3 billion).

What I didn’t like

• The Westpac/Melbourne Institute survey of consumer sentiment fell by 1.1% to 95.5 in August. The confidence index is down 5.8% on a year ago. A reading below 100 denotes pessimism.
• The Consumer Price Index edged up 0.1% last month, versus expectations of a 0.2% gain. This is good for delaying rate rises but I’d prefer a stronger US economy to drive our Aussie dollar down.
• Our dollar is up to nearly 79 US cents again, after dipping on this ‘fire and fury’ talk.
• US producer prices unexpectedly fell by 0.1% in July to be up 1.9% over the year. The monthly fall was the biggest drop in 11 months.
• Chinese imports in July were up 11% on a year ago (forecast +16.6%), with exports up 7.2% (forecast +10.9%).

Prayer for the weekend

Let’s hope that Donny and Kimmy become buddies in the not-too-distant future, if only for stocks’ sake.

The week in review

• My SMSF did unexpectedly well over 2016-17. Here are the reasons for the great return.
• Paul Rickard thinks Commonwealth Bank’s AUSTRAC fiasco has become a classic media beat-up and that investors should focus on the bank’s results. Read his article here.
• While the Australian share market finished flat for the month, the income and growth model portfolios saw moderate gains in July.
• Charlie Aitken believes it’s time to take profits in Tencent and be careful with large-cap tech shares.
• International education is Australia’s third-largest export sector. Tony Featherstone says Australian universities’ growing number of students from Asia keeps the sector buoyant.
• Kelly Partners recently listed on the ASX and Ellerston Capital’s David Keelan sees growth ahead for the business.
• The brokers upgraded Webjet, while Fortescue Metals was in the not-so-good books.
• In our second broker report, Bluescope Steel was upgraded, while Commonwealth Bank copped a downgrade.

Top stocks – how they fared

What moved the market?

• Geopolitical tensions between the US and North Korea kept markets under pressure.
• Mixed results from reporting season. The market reacted well to CBA’s record profit result after it announced a 5% increase in annual cash profit to $9.88bn. Investors also liked the results from Aristocrat Leisure and IOOF.

Calls of the week

• “The Donald” said North Korea would be met with “fire and fury” if it did not stop threatening the United States. Then he said those words might not have been tough enough! Something tells me this war of words could continue …
• The CBA Board axed short-term bonuses for executives this year over the AUSTRAC case. In case you missed it, my mate Paul Rickard thinks the scandal is a bit of a media beat up. Read his article here.
• On Super TV this week, Dr Frank Gelber said he doesn’t expect the RBA to hike rates for three years! I think he’s being a bit too pessimistic and my crystal ball says 2018. My analysis is consistent with the Reserve Bank and Treasury economists who see us growing around 3% this financial year.

The week ahead

Australia

• Monday August 14 – Credit & debit card lending (July)
• Tuesday August 15 – ANZ/Roy Morgan consumer sentiment
• Tuesday August 15 – New vehicle sales (July)
• Tuesday August 15 – Reserve Bank Board minutes
• Wednesday August 16 – Wage price index (June quarter)
• Thursday August 17 – Average weekly earnings (May)
• Thursday August 17 – Employment/unemployment (August)
  

Overseas

• Monday August 14 – China monthly data (July)
• Tuesday August 15 – US Empire Manufacturing (August)
• Tuesday August 15 – US Retail sales (July)
• Tuesday August 15 – US NAHB Housing market index (August)
• Wednesday August 16 – US Housing starts / Building permits (July)
• Wednesday August 16 – FOMC Meeting minutes (July)
• Thursday August 17 – US Philadelphia Fed Business Outlook (Aug)
• Thursday August 17 – US Leading index (July)
• Friday August 18 – US Consumer confidence (August)

Food for thought

“My interest in life comes from setting myself huge, apparently unachievable challenges and trying to rise above them.” – Richard Branson, Virgin Group founder.

Last week’s TV roundup

• IOOF’s share price headed higher following its company report, so to discuss the results, CEO Christopher Kelaher joins the show.
• Anthony Scali, CEO of Nick Scali, joins Super TV to discuss the company’s record profit announcement and the environment for retailers.
• Raymond Chan from Morgans shares his views on CBA and other company reports so far this season.
• Just what’s going on with house price rises in Sydney and Melbourne, and should we expect a collapse? To share his views, Frank Gelber from BIS Oxford Economics joins the show.

Stocks shorted

ASIC releases data daily on the major short positions in the market. These are the stocks with the highest proportion of their ordinary shares that have been sold short, which could suggest investors are expecting the price to come down. The table shows how this has changed compared to the week before.

This week one of the biggest movers was iSentia Group, with its short position increasing by 1.14 percentage points to 12.12%.

Source: ASIC

Charts of the week

Best business conditions in almost 10 years!

Source: NAB, CommSec

You know how I like to tell you about the good news stories out there? This is one of them. In July, the NAB business conditions index rose from 14 points to a 9 ½ year high of 15 points, while business confidence rose from 8.4 points to 11.7 points.

Top 5 most clicked stories

• Peter Switzer: My 50% return last year, and what I bought last week
• Rudi Filapek-Vandyck: Buy, Sell, Hold – what the brokers say
• Charlie Aitken: How to play a peaking Australian dollar
• Paul Rickard: Portfolios post modest gains in July
• James Dunn: Reporting season week 2 – record profit expected for CBA

Recent Switzer Super Reports

• Thursday 10 August 2017: CBA report ticks most boxes
• Monday 7 August 2017: My SMSF

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.