News for the Week of 05-16-2016 – 05-20-2016
by David Abuaf, CFA
Investment Manager, RJFS
Government / Political / Economic
1. Supreme Court sent back to lower courts suits by religious employers opposed to the health-care law’s contraception requirements
2. 21 nations said they would consider training and arming the Libyan government as it struggles to stop Islamic State
3. President-elect of the Philippines vowed to crack down on a range of antisocial behavior and restore the death penalty
4. The US and Russia remained at odds over Assad’s fate in talks aimed at reviving the Syrian cease-fire
5. The IMF is demanding that Europe free Greece from all payments on its bailout loans until 2040
6. Population growth in big US cities is slowing as people move for jobs and suburbs regain their appeal
7. France is withholding authorization for NATO to take control of the European missile-defense system
General Markets / Economic
1. You may know my thoughts on politics and the markets – this one is not good! US policy makers moved to boost oversight of the Treasury market amid growing concern over the prospect of more volatility. You know, because as a country it’s the government’s job to control the markets?
2. China’s Central Bank is again facing the pressure of a weaker yuan and the prospect of currency outflows
3. US economic gauges showed a pickup in industrial output and housing, and firming inflation
4. Japan’s economy rebounded sharply in the first quarter, with GDP expanding at 1.7%
5. The Fed indicated that if the economy continues to improve, there is still a strong possibility ofrate increase in June
6. House Republicans and Obama agreed to help Puerto Rico restructure its $70B debt load
1. This is why there is risk everywhere. Berkshire Hathaway disclosed that it had invested $1B in Apple stock earlier this year
2. Investigators found a bug in a flight-data calculator on Airbus jets that could lead to takeoff problems
3. Bayer approached Monsanto about a takeover that would fuse two of the largest suppliers of crop seeds and pesticides. I imagine the DoJ will fight this, but there is a chance that the merger can go through
1. Are you prepared for the most shocking news of your life? Online medical services misdiagnosed ailments and failed to ask patients key questions. But of course, people still trust WebMD over their doctor, go figure!
2. Talk about truly horrendous! A Massachusetts’s man’s wife died while giving birth to their newborn daughter (May 6th). 5 days later his daughter died. During the wake for both of them, he found out his 46 year old sister passed from cervical cancer. And just this past weekend his grandmother suffered a stroke!
3. The Oppenheimer Blue, a 14.62 carat diamond sold for a record breaking $57.6m
4. Robin Wright announced that she got a raise after threatening to go public if her salary on House of Cards didn’t equal her male co-star’s
Commentary for Week of May 16 – May 20, 2016
by David Abuaf, CFA
Investment Manager, RJFS
US stocks finished mixed last week, bookending poor midweek trading with rises on Monday and Friday. This was the first weekly increase in a month for the S&P 500, though it is effectively unchanged since 18 months ago. While both the S&P 500 and the Nasdaq rose, the Dow Jones fell on the week as mega-cap stocks were hurt by a revived US dollar.
Last week, two big surprises pushed investors in opposite directions. The first came on Wednesday with the release of minutes from the Federal Open Market Committee Meeting’s in April indicating that most policy makers think a rate hike is appropriate if economic data, including inflation and employment, support it (spoiler alert, in the US it does). The second piece of news was the Wal-Martrescued the market with first quarter results handily beating analyst estimates – this was especially welcome after the previous week’s reports from JC Penny, Macys, and other big box retailers where data coming out was bad!
According to Jack Ablin, chief investment officer of BMO Private Bank, Corporate fundamentals are solid and the economy is steady, if no growing quite as much as investors would like. He believes the only thing standing in the way of a higher market is valuation, with the P/E ratio in a 15-18x range. With the market this week approaching the long Memorial Day weekend, things might quiet down briefly.
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