News for the Week of October 17-21, 2016

News for the Week of 10/17/16 – 10-21-16

 

by David Abuaf, CFA

Investment Manager, RJFS

 

Government / Political / non-Economic

 

1.     Kuwait’s ruler dissolved the country’s Parliament by royal decree over unspecified security concerns

2.     A State Department official in 2015 tried to keep the FBI from marking a Hillary Clinton email as classified

3.     Voters are showing less interest in the presidential race than in previous years – damn millennials!

4.     A retired general pleaded guilty to lying to officials probing leaks about secret US government hacking

5.     Labor unions are plowing money into the elections at an unprecedented rate, largely in an effort to help elect Clinton and give Democrats a majority in the Senate

6.     Health insurers that sell coverage through online exchanges have been granted big premium increases – wasn’t one of the promises “affordable” care?

7.     An ex-NSA contractor stole at least 500m pages of government records, including top-secret military data, the US alleges – whatever happened to vetting contractors before they begin working!?

 

 

General Markets / Economic

                                                                                                           

1.     Banking regulators are increasingly concerned about earnings adjustments to justify more borrowing in leveraged loan buyouts

2.     China’s drifting economy steadied in the third quarter, expanding by 6.7% from a year earlier

3.     The Brazilian central bank cut its key interest rate to 14% from 14.25%, the first reduction in four years. That sounds terrible! (the duration of 14.25%, not the cutting)

4.     Some officials are warning that heightened emphasis by banking regulators and law-enforcement officials on financial misconduct may be constraining global growth

5.     The ECB delayed a decision on whether to boost stimulus, but hinted it would extend its bond-buying program in December

 

 

Company News

 

1.     Cooling appliance firms are bracing for a shift to alternative coolants after global envoys agreed to phase out HFCs by 2019

2.     Constellation Brands is near a deal to sell its Canadian wine business for about $760m

3.     Pepsi set new targets to reduce sugar, salt and fat in its drinks and snacks

 

 

Interesting News

 

1.     Say goodbye Snoopy. MetLife will stop using the Peanuts character in its ads.

2.     Candy Crush is getting its own TV game show featuring teams of two competing to be crowned a Candy Crush champion.

 

 

            Commentary for the Week of 10/17/16 – 10-21-16

 

by David Abuaf, CFA

Investment Manager, RJFS

 

Chart from Barrons

  

Equities went up a little, then down a little last week, and by Friday ended up a touch higher than where they had started. Large cap stocks underperformed, pressured by the rising US dollar. Trading was uninspired and investors remained on the sidelines.

 

The third quarter earnings season ground on, but provided little impetus, except for Morgan Stanley, where strong earnings boosted financials, up 1.2% last week. The greenback’s strength hurt mega-cap stocks, such as those in the Dow Jones Industrial Average, which tend to get a significant portion of revenues overseas.

 

Keith Moore, a strategist at FBN Securities, says the market seems tired and believes that investors are sitting on their hands, marking time ahead of the US elections. Adam Sarhan, of Sarhan Capital, says that the sideways action also is a consequence of investors waiting for clarity on other issues, such as the vigor of the quarter’s earnings and the Fed’s expected rate hike in December. The result is that many are hesitant to commit new capital to an aging bull market, yet according to Sarhan, “every time the market falls, buyers step in.”

 

The Fed’s likely rate increase, coupled with the ECB’s continued monetary easing, suggests European stocks are relative bargains compared with American equities, says Keith Mahn of Hennison & Walsh Asset Management.