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News for the Week of 11/21/2016 – 11/25/2016
by David Abuaf, CFA
Investment Manager, RJFS
Government / Political / non-Economic
1. Donald Trump said Melania and Baron may not immediately move with him to the White House
2. President Obama is considering new measures in his final months in office to strengthen the nuclear agreement with Iran
3. Pacific Rim leaders meeting in Peru are pushing back against skepticism toward free trade deals
4. Merkel said she will run for a fourth term as German chancellor next year
5. Trump and his advisers appear set to push for trade concessions from Mexico and Canada rather than moving to kill NAFTA
6. Pope Francis indefinitely extended the power of priests to forgive the “grave sin” of abortion
7. China is pushing to conclude its own Asia-wide trade pact in a step to widen its influence amid the apparent collapse of a US backed Pacific trade deal
8. A federal judge in Texas issued a nationwide injunction blocking a Labor Department rule that would expand eligibility for overtime pay – I’m calling it, this is going to the Supreme Court next session
9. Zika researchers found evidence that babies who seem normal at birth can develop defects from the virus later in infancy
10. The US and its allies are pressing Iran to sharply cut the amount of radioactive material it holds in a bid to shore up last year’s nuclear deal
11. Some republicans are pushing an overhaul of Medicaid, which under the health law has expanded in states run by GOP governors.
General Markets / Economic
1. Advertisers are reflecting on whether they are out of touch with voters who backed Trump and are re-evaluating their reliance on data in the wake of the election
2. Analysts say the euro could fall to dollar parity within a year, if the Fed raises rates and the ECB continues its monetary policy
3. The rapid rise in interest rates since Election Day is taking a toll on the mortgage market and lenders are scrambling to adjust
1. Symantec agreed to acquire LifeLock, which sells identity-theft protection services, for $2.3B
2. Sunoco Logistics will buy Energy Transfer Partners in a $21B all-stock deal to simplify a pipeline empire
1. Curious who Venezuela’s nemesis is? Go down to Home Depot in Hoover, Alabama and ask for their hardware salesman. No joke! On his lunch breaks from the hardware section, Gustavo Diaz manages DolarToday, which provides a benchmark exchange rate used by his compatriots to buy and sell black market dollars. That allows them to bypass some of the world’s most rigid currency controls. According to VP Aristobulo Isturiz, “DolarToday is the Empire’s strategy to push down the currency and overthrow Maduro”!
2. Heinz recalled one of their popular gravy products…days before Thanksgiving!
3. Twitter CEO Jack Dorsey was briefly booted from the platform he helped co-found!
Commentary for the Week of 11/21/2016 – 11/25/2016
by David Abuaf, CFA
Investment Manager, RJFS
Chart from Barrons
Market action during the Thanksgiving-shortened trading week indicated that the postelection rally has legs. The S&P500 rose every day and was up for the third consecutive week, hitting new records. The Russell 2000, which tracks small-cap stocks has been on an absolute tear, rising 15.8% in three weeks.
According to David Waddell of Waddell & Associates, the market is pricing in a near-certainty of faster GDP growth next year. If the current trend is for 2.8%, “that could go to 4.5% pretty quickly. That’s why there’s so much euphoria. We’ve seen big piles of cash coming into the market. People were so terrified of the election, and now all of that cash is coming back in a hurry. That’s why the market’s not going down, because everybody’s buying every dip now.”
Waddell’s sense of bullishness is widespread across market cap stocks. But not everyone has given up looking for the brake. Jeff Carbone, of Cornerstone Financial Partners, says the influx of cash at this stage of the rally has begun to make him cautious. “My fear is people are trying to chase, you can see by the inflows that people are starting to think they’re going to miss something.”
Finally, the coming week could help determine the path of the market in December. On Friday, the government will release November jobs data, giving investors more clarity on whether the Fed will be raising interest rates.
All opinions presented are those of David Abuaf, and not of Raymond James or Forman Investment Services.
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