Investors received a bucketful of good news this week. Brexit got a reprieve, Hong Kong authorities caved in to protestors demands, and another round of trade talks is set for October between the U.S. and China. Welcome to September.

 

As of Friday, the S&P 500 Index was less than 2 percent from all-time highs. The other indexes are close as well. And while September is historically not a good month for the markets, this time around, September is starting off with a big bang. Can it continue?

 

Yes, in my opinion. We could see all three averages break out into new, all-time highs before all is said and done. While traders and computers trade on the headlines, I am more interested in looking underneath the hood to see if these gains are justified and can be sustained. So far, I'm betting they can.

 

Last week, I advised investors that the markets would remain in a trading range until some new tweet or announcement on trade changed the dynamics. Thursday night's revelation that trade talks would resume in October at the ministerial level between the two countries was the catalyst we needed to break out of a three-month, 100-point trading range on the S&P 500 Index.

 

Earlier in the week, we also had some good news when Hong Kong leader, Carrie Lam, announced the withdrawal of an extradition bill that would have allowed Hong Kong's citizens to be extradited to China for trial. Whether that will appease the thousands of protestors remains to be seen, but for now it was a positive development and removed one brick in investors' wall of worry.

 

Over in the U.K., Brexit took a bizarre new turn. Boris Johnson, the prime minister, was handed several defeats this week, culminating in what can only be called a palace coup. His no-deal Brexit departure, scheduled for Oct. 31, went up in smoke as both the opposition parties, as well as members of his own party, rebelled. They not only overturned his strategy, but insisted on an extension request from the EU if Johnson could not work out a deal by Oct. 14.

 

In response, Johnson called for snap elections, but no decision has been made (and won't be) until at least next week by the parties in Parliament. Investors took these developments as a positive, both for the UK as well as for the European Union.

 

In the meantime, readers may have noticed that I have resisted joining the "recession next year" crowd. Despite all the angst generated by the inverted yield curve and what it may or may not portend, I have not seen enough evidence to convince me that recession is knocking on our door.

 

There is no question that areas of the economy, notably manufacturing and possibly farming, are faltering, but services, which largely represent consumer spending, seems more than healthy to me. I will blame Donald Trump for the present woes in agriculture thanks to his tariff war. Manufacturing, despite our president's rhetoric, it continues to slump.

 

Linking "Making America Great Again" to a new American-led age of manufacturing has been a dismal failure. Manufacturing jobs are still leaving. Companies are still fleeing and this weeks' Institute of Supply Management report (ISM), which measures the health of the nation in manufacturing and non-manufacturing sectors, continues to tell a tale of two sectors.

 

The manufacturing sector took another nosedive in August, with employment falling from 51.2  percent to 47.4 percent. Fortunately, the America we live in today does not depend on manufacturing jobs to grow the economy.

 

Instead, consumer spending is the engine that drives our economic growth. The release on Thursday of the ISM report on the non-manufacturing sector showed continued growth that was 2.7 percent higher than July's number. As long as the consumer stays healthy, I believe, so will the economy.

 

As for the markets, I am looking for the rally to continue with fits and starts for the next week or so. At that point, all eyes will be on the Fed and a possible interest rate cut of 0.25 percent.

 

Bill Schmick is registered as an investment adviser representative and portfolio manager with Berkshire Money Management (BMM), managing over $400 million for investors in the Berkshires.  Bill's forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

Now that the media is on to more interesting topics, the August announcement by the Business Roundtable deserves further examination. Afterall, it is not every day that a group of the nation's most powerful chief executives redefines the goals of American corporations.

 

The maximization of shareholders' profits, above all else, has been the motto of the Business Roundtable (BRT) since the 1980s. Critics claim that this attitude has led to all kinds of negative consequences for society overall. The environment, the individual worker, suppliers (think underage Bangladesh garment workers), consumers and local communities have been needlessly harmed by this myopic view of a corporation's purpose.

 

It is probably no accident that the modern age of inequality coincided with the establishment of this guiding corporate principal. Boosting their return of capital and generating as much profit as possible was "good for business," as was shipping American jobs overseas to cheaper labor markets like China.

 

The membership of the BRT is made up of the CEOs of America's 192 largest companies. They are paid to be smart, to be far-ranging thinkers who can be expected to steer their companies through future challenges. As such, all of them are keenly aware that the nation is in the throes of a heated debate over exactly what are the responsibilities of corporations now that they are considered equal citizens under the law.

 

Should Walmart, for example, take the lead and cut back their gun sales, since no one in Washington has the courage (or ability to create a compromise) that would lead to a solution in curbing the almost-daily massacre of innocents throughout the nation? Should CEOs and other managements voluntarily cut back their compensation, which has grown by almost 1,000 percent since 1978, versus the 12 percent worker compensation, during the same time period?

 

The rise of the millennial workforce makes taking corporate workers for granted no longer an option, nor is paying women less than men for the same job. More and more younger employees want their companies to stand for something other than profit. And in this age of historically low unemployment, it is getting harder and harder to recruit young talent (especially in the tech world) if the greenback is the only thing that companies offer.

 

In national politics, both Republicans and Democrats are increasingly targeting the business community as the cause of many of society's ills. A line of Democratic candidates is demanding that businesses start acting like good social citizens or be penalized for ignoring the needs of said society. Both parties are attacking the medical and health sector on everything from drug pricing to the escalating costs of health services and insurance.

 

As the incidence of data hacks intensifies and impacts millions of Americans, companies in the financial, retail, and other industries are under fire for failing to protect consumers from data theft. The rise of social media leaves every company vulnerable to damaging social campaigns on issues as diverse as chemical poisoning to greenhouse gas emissions. They can create public relations firestorms that cannot be controlled or managed.

 

The move by the BRT was a wise move, in my opinion. For the most part, it was an exercise in catching-up to some individual members who have already taken the initiative to make far-reaching investments in employees, communities and the broader society.

 

It does not mean, however, that shareholder value will now only be an equal consideration with another stakeholder's interests. It only acknowledges that shareholder value is no longer their sole business. In a country where capitalism has morphed into a system that favors corporations over individuals, and the rich over the poor, this is simply a first tiny step in recognizing that reality.