News for the Week of August 1 – August 5, 2016
by David Abuaf, CFA
Investment Manager, RJFS
Government / Political / non-Economic
1. European governments are losing track of significant numbers of refugee children who entered the Continent without their parents
2. Merkel’s allies attacked her migrant policies and questioned the German leader’s security concerns. And those are her allies!
3. The IOC will likely shy from again holding the Olympics in cities that show signs of instability, officials said, citing Rio’s problems
4. An FBI employee pleaded guilty about sending sensitive information about the US government to China
5. GW Bush delivered a critique of Trump’s policies without naming him. On the other side, three more DNC officials plan to leave the organization in the wake of an email-hacking scandal
6. Delaware no longer has a death penalty
7. India’s upper house approved an overhaul of the nation’s convoluted tax system, in a victory for Modi
8. Moon Express became the first commercial venture cleared by the US for a mission beyond Earth’s orbit
9. A transit police officer in Washington DC was arrested on charges of trying to help Islamic State
10. Eek, Belgian investigators say that some of the suspects in recent terror plots were collecting welfare benefits
General Markets / Economic
1. Tech industry earnings are highlighting how mobile and cloud computing are delivering substantial profits and driving growth
2. Goldman Sachs was subpoenaed for documents related to their dealings with 1MDB, the Malaysian fund at the center of a corruption scandal
3. Quarterly earnings calls are indicating that wireless carriers may be ending their price war as the market is nearing saturation
4. Consumer spending rose for the third straight month in June, growing 0.4%
5. The Bank of England cut its benchmark rate to a historic low and revived a bond buying program amid concern over the Brexit vote’s effect of the economy. Ah, the wonders of when the financial world has to pick up the problems created by politics; funny, we only ever hear the other side!
1. A Chinese group agreed to buy Israeli games business Caesars for $4.4B
2. Uber agreed to sell its Chinese business to rival Didi
3. Tesla agreed to buy SolarCity for $2.6B in stock
4. Verizon agreed to acquire a company that makes GPS tracking systems
5. McDonald’s is replacing high-fructose corn syrup with sugar in sandwich buns as it tweaks its menu
6. Biogen has drawn takeover interest from Merck and Allergan, raising the possibility of another huge health-care deal
7. Walmart is in talks to buy online discount retailer Jet.com, escalating its costly quest to compete head-on with Amazon
8. Time Warner paid $583m for a 10% stake in Hulu
9. Walmart is trying out a scheduling system to give store employees more control over their hours
1. To those who read this…has anyone here ever run a marathon? No, no, put your hands down; you haven’t really run a marathon; you’re nothing. If you really want to run a marathon, go to the Entabeni Safari Conservancy in South Africa and run their marathon…where you’re literally being chased by Rhinos. It’s actually a big 5 marathon, where runners are ROUTINELY running away from Lions
2. A High School teacher has been accused of deflating a student’s tire for taking his parking space
3. Some kid just threw out the first pitch at a Baltimore Orioles game…dude…Dude…
DUDE… Just a few years ago he had the first ever pediatric bilateral hand transplant!!! When he was 2 years old, he had an infection and had to have his hands and arms amputated. When he was 4, his mother donated a kidney to him. At 8, he had the transplant. Unreal. Here’s the link to the transplant video and his story, his name is Zion Harvey: Zion’s Story: The Gift of Hands
4. According to new evidence from Australia, James Cook was the first to introduce the chicken to New Zealand
5. Having conquered the rap world and made inroads into fashion, Kanye West is now looking to apply his creativity to work with Ikea
6. Take that dentists! The American Dental Association has admitted there’s very little evidence that flossing has any proven dental benefit. However, they deny that flossing is a waste of time
Commentary for Week of August 1 – August 5, 2016
by David Abuaf, CFA
Investment Manager, RJFS
After weeks of slumber, the market sprang awake Friday, jolted by much better than expected July employment report. The S&P 500 rose 0.9% on the day, and closed at a new high. Most notable is that after lagging earlier in the year, the NASDAQ has risen about twice as fast as the Dow and S&P 500 in the past month, as technology stocks have outperformed.
What was most surprising about the jobs report was that the labor force increased by 400,000 and the unemployment rate stayed steady at 4.9%! Additionally, wages ticked up by 0.3% and have risen 2.6% in the past year, the most since 2009.
According to Keith Lerner at SunTrust, what was so great about the jobs numbers is “Everyone was waiting for this employment report to see if it confirmed the weakness in the GDP number; it didn’t and people had a sense of relief.” With the improving jobs market it is more likely the Fed will raise interest rates, possibly as soon as September, with the futures market indicating a September rate hike chance of 26% from 18%. (Yield curve reviewed from July 29 and August 5, 2016)
For much of the year, gold has risen and utilities and telecom stocks have led the market, as they offer large dividend yields and less risk from an economic contraction. With the market shifting, new sectors are leading the indexes now. Tech and health-care companies have been showing particular strength in this earnings season, with more than 80% of S&P 500 companies in each of those two sectors reporting better than expected earnings.
All opinions presented are those of David Abuaf, and not of Raymond James or Forman Investment Services.
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