News for the Week of June 27 – July 1, 2016
by David Abuaf, CFA
Investment Manager, RJFS
Government / Political / Economic
1. Britain’s vote to quit the EU threw its Conservative and Labour parties into leadership battles
2. Politicians in Scotland are suggesting holding another independence vote and getting back into the EU
a. The most appropriate financial query here is: Will Scotland be able to ditch the pound and move to the euro. If Scotland succeeds in seceding from the UK and do not move to the euro, they will still be using the UK’s currency without any ability to affect monetary policy of the currency!
b. Leaders met with EU officials for talks about protecting the nation’s interests in the bloc
3. Missouri governor vetoed bill allowing concealed carry without a permit
4. Istanbul’s busiest airport was hit by a terrorist attack that killed at least 36
5. EU leaders agreed that the UK couldn’t cap migration and expect unrestricted free access to the bloc’s single market
6. The Pentagon lifted a ban on transgender service members
7. Washington asked Moscow to force Assad’s regime to ground its Air Force
General Markets / Economic
1. One of the biggest job losses in financial history may occur in the coming years as London is at risk to losing thousands of finance jobs to other European cities
2. Fast food restaurants saw no visitor growth in March, April, or May, a sign of consumer caution amid economic uncertainty. That’s news to me. I wouldn’t imagine “economic uncertainty” would affect customer growth at McDonalds or Wendy’s; maybe at Applebee’s.
3. Personal spending rose 0.4% in May from April
1. Pepsi is bringing back Diet Pepsi with aspartame
2. Lyft has hired Silicon Valley deal-maker Qatalyst (Frank Quattrone’s shop) to search for firms looking to buy a stake in them
3. EU signaled it plans to issue more antitrust charges against Google over its advertising dominance
4. IKEA is recalling 29 million chests and dressers in the US and Canada after injuries and deaths due to the furniture tipping over.
5. Credit Suisse is being probed over its role in financing sales of military ships to Mozambique that ballooned that nation’s debt
6. Mondelez offered roughly $23B to buy Hershey and create the world’s largest candy maker. Hershey started off by rejecting the bid
7. Apple is in talks to acquire Tidal, a streaming music service run by Jay Z
1. This might be a first. The family of a missing 24 year old NY woman has asked Shania Twain to bring attention to the case. Shania is the girl’s idol.
2. Police were called to a NJ elementary school after a 9 year old boy made a disparaging comment about the brownies he had eaten (how dare they; they were store bought, ugh!). Another student interpreted the remarks as racist and instead of just punishing the offender with detention, the school turned to law enforcement. Apparently the directive to call police over even minor incidents comes from the top down. School officials are told to call the police and Child Protective Services over issues as petty as name calling!
3. Drop in US deaths from heart disease appears to have hit a wall after decades of dramatic progress
4. Miss Teen USA is eliminating the swimsuit competition portion. Don’t read anything into it. It’s now an “athletic wear” competition
Commentary for the Week of June 27 – July 1, 2016
by David Abuaf, CFA
Investment Manager, RJFS
I always try to do my best to highlight the benefits of “waiting and seeing.” What I mean by this is “taking in the information available and acting on it only after you have researched its merits. Sometimes, it may take days or weeks or months to determine if it warrants any action or if it’s even an accurate sign.”
Last week was a great example of why this strategy can be successful in the long run. In just four days, world equity markets recovered most of the ground lost following the June 23 Brexit vote. All three of the major US stock indices ticked up at least 3% on the week. The reversal of course began on Tuesday.
The Bank of England signaled further monetary stimulus is on the way, and some believe the ECB will follow suit. However, Brexit does mean expected US rate hikes are on hold, perhaps until 2017. High trading volume characterized the tumultuous week. By the lows Monday, the US market had fallen nearly 6% before rebounding roughly the same. Financial stocks were the most hit, falling 8% after the vote. Kevin Kelly of Recon Capital said investors “went from feeling like they were walking on broken glass” to the view that it will take two years for the UK to leave the EU, so nothing has really fundamentally changed.
Near term, of course, the market will look for any potential Europe-deprived fallout in US corporate earnings. There is the expectation on the street that second half US profits will rebound, but that could be called into question if the European economy tanks.
All opinions presented are those of David Abuaf, and not of Raymond James or Forman Investment Services
This information is not a complete description of the securities, markets, or developments discussed and has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. Raymond James is not affiliated with Kevin Kelly or Recon Capital.
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