News for the Week of July 18 – July 22, 2016
by David Abuaf, CFA
Investment Manager, RJFS
Government / Political / non-Economic
1. Turkey experienced a coup over the weekend. Many in the network are saying there’s a high possibility (70-80%, one person at 100%) that it was all organized by Erdogan
a. Some are blaming Jews for the coup
b. Already 25,000 people have been fired as a result of the ‘crackdown.’ These folks are mainly teachers and judges and lawyers
c. US and European officials voiced concern about the mass arrests
2. Venezuelans streamed into Colombia to buy food and medicine after the border was briefly opened
3. Donald Trump is officially the GOP presidential nominee
4. A federal appeals court ruled that Texas voter ID laws discriminate against blacks and Hispanics
5. Brazil’s federal police arrested 10 people they said were linked to Islamic State and planning terror acts during the Rio Olympics
· Security staff with little training are being hired to screen for weapons outside Olympic venues
General Markets / Economic
1. Britain’s vote to leave the EU has cast into doubt the future of a trade deal between the US and EU
2. Amazon and Wells Fargo entered into a partnership to offer interest rate discounts to students
1. VW executives pledged to compensate hundreds of US dealers who have been hurt by the diesel-emissions scandal
2. Monsanto spurned Bayer’s sweetened takeover offer, saying Bayer continues to undervalue it. Well, just tell them how much you would accept!
3. Walmart has stopped accepting Visa cards as payment in certain locations
4. The Justice Department cleared AB InBev’s acquisition of SABMiller – it’s a $108B deal!
5. I don’t usually discuss quarterly earnings, but GM posted its best financial quarter in the seven years since emerging from bankruptcy
1. A woman riding a motorcycle in China was killed after a heavy winded lifted an umbrella stand in the air, and the pointy end of one of the umbrella punctured her throat!
2. A construction worker near the Memorial Hospital of South Bend is playing “Where’s Waldo” with children at the hospital. He uses an 8 foot wooden cutout of the worker and hides him – multiple times per day – somewhere on the construction site
3. A Duke University study published recently in Biological Psychiatry finds that over activity of a neurotransmitter receptor in the brain is responsible for OCD
4. Guns N’ Roses was detained at the Canada-US border when what was found on the band’s tour bus? Any guesses? Pretty obvious; a gun. But not just any gun, a stun gun.
5. Two Air Transat pilots were arrested on the suspicion of being impaired by alcohol just before they were due to fly a passenger jet to Toronto from Glasgow. Some passengers were unhappy that their inconvenience was rewarded only with dinner, a night in a hotel, and $200 Canadian. I believe they fail to remember their reward was also their life!
Commentary for Week of July 18 – July 22, 2016
by David Abuaf, CFA
Investment Manager, RJFS
Stock prices closed at all-time highs for the second week in a row, finishing with a flourish on Friday. Still, it was an up and down week, due partly to second quarter earnings reports that tugged the market one way and then the other. Soft results from the transportation sector and Intel on Thursday cooled off a market that had shot up on strong report from Microsoft the previous day. Why are we discussing these stocks, especially if you don’t own any? Because these are large stocks and groups of stocks that can be used as foresight to the rest of the financial market (bell-weathers); it’s because of this that traders and investors put additional emphasis on the earnings of stocks that are not necessarily owned by them to see how the broader market will perform.
On a more macro scale, Markit said that its July US Manufacturing Purchasing Managers Index (PMI) rose above expectations and the highest in 9 months. Across the pond, the Eurozone July PMI data fell less than feared. Even hints from the Fed that it could raise rates before year end didn’t sidetrack the bull – for now.
According to Quincy Krosby at Prudential, the package of stronger economic data was helpful. Though earnings weren’t great, the tone is more positive and suggests – with more companies yet to report – that the profits-growth recession is lessening. Rightly or wrongly, that’s led to an easing of worries about Brexit. Mark Luschini at Janney Montgomery Scott says investors are borrowing earnings growth from the balance of the year and 2017.
According to Seth Setrakian at Spectrum Capital, “stocks should be harvested right now,” based on the Chicago Board Options Exchange Volatility Index (VIX), which trades inversely to stock prices and is awfully low at 12.02. All that said, short-term caution is still called for. August is traditionally a month of low activity and profit taking, while September is historically the worst month for stocks. This coming week, the Fed is meeting and while no rate hike is expected, they might give more hints about the future.
All opinions presented are those of David Abuaf, and not of Raymond James or Forman Investment Services.
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