News for the Week of September 12-16, 2016

News for the Week of 09/12/2016 – 09/16/2016

 

by David Abuaf, CFA

Investment Manager, RJFS

 

Government / Political / non-Economic

1.     Hillary Clinton’s campaign said she had been diagnosed with pneumonia, after she had passed out during a 9/11 memorial. Additionally, a news alert on my phone just said she is releasing additional medical records

·       This upsets me. Not for obvious reasons. If I were a politician, I would have said it was the “magnitude of the situation and the respect I have for our first responders and every American that brought me to swoon.” How am I a better politician than others? I hate politics!

2.     A Syrian rebel group is seeking to rally other factions to continue a drive to overthrow Assad, in a challenge to a cease-fire deal

3.     Incarceration rates are rebounding in some states, amid an opiate epidemic and some high-profile crimes

4.     The NCAA has pulled seven tournament games from North Carolina over a transgender bathroom law

5.     The Philippines are seeking arms from Russia and China, signaling a shift from a reliance on the US

6.     Donald Trump proposed new federal subsidies for child care, plus paid maternity leave for workers who don’t have it. That second one is dumb, it won’t ever get passed (I’m not saying I disagree with the idea)

7.     Colin Powell’s hacked emails show the former Secretary of State harshly criticizing both Clinton and Trump – I guess outside my lack of military experience, we share something in common!

8.     Data shows the share of the US workers testing positive for illicit drug use reached its highest level in a decade

9.     The Bank of Japan’s experiment in monetary easing is floundering and its engineers are split over how to get it on track

10.  The EU extended sanctions against Russian officials and pro-Moscow separatists in Ukraine

 

General Markets / Economic

1.     Oil prices are entering their sixth month of trading between $40 and $50 a barrel, as a narrow range becomes a new reality

2.     Fed officials, lacking a strong consensus for action ahead of their next policy meeting, are leaning toward waiting until late in the year before raising rates

3.     US household income surged last year amid sustained job growth, after a long stretch of stagnant and declining earnings

4.     The Atlanta Fed’s Lockhart, considered by many a bellwether central-bank voice, will step down in February

5.     The US is investigating whether aluminum at a NJ factory is part of an alleged scheme by a Chinese billionaire to evade tariffs

  

Company News

1.     Under a new EU proposal, Skype at WhatsApp could face the same rules that regulate telecom firms

2.     Time is launching a streaming video service this week in its latest bet on digital advertising

3.     Amazon’s Jeff Bezos disclosed plans for a giant reusable rocket for sending people and satellites into orbit – welcome to the party Elon Musk 2.0

4.     Canadian fertilizer firms Agrium and Potash agreed to merge, forming a company valued at about $27B

5.     GM said its Bolt electric car will travel 238 miles on a single charge

·       I don’t understand why all the companies that are creating electric cars can’t work together and create an efficient car. After that, they should split up and create their own brands, but at least get the charging and all the other “operational” stuff down first!

6.     Monsanto agreed to sell itself to Bayer in a $57B deal that would create an agricultural powerhouse

7.     Ford promised that future tech ventures will yield lofty returns but said near term profit will be pinched

8.     Unilever is in talks to acquire Honest, the consumer products retailer co-founded by actress Jessica Alba

 

Interesting News

Ø  Think the American presidential race is coming unglued? Here’s one that really is. Special envelopes designed to hold mail-in ballots for Austria, are literally unglued…the glue that should seal the envelop is mysteriously malfunctioning

 

 

Commentary for the Week of 09/12/2016 – 09/16/2016

 

by David Abuaf, CFA

Investment Manager, RJFS

 

Chart from Barrons

Chart from Barrons

 

In a roller coaster week, stocks eked out a small victory. The roller coaster can be blamed on heightened uncertainty and rising volatility, which began the previous week after Fed officials stirred up fears of an interest-rate increase happening sooner rather than later.

 

This Tuesday and Wednesday, the policy-setting Federal Open Market Committee meets in what is likely the most-watched Fed confab of the year. On balance, the US economic data released last week was soft, reinforcing the market’s expectations a hike won’t come this week.

 

The probability of a rate hike, as measured by the fed-futures market, sank to 20% from more than 30% a week earlier. Still, investors fear a September surprise – and surprises in economics are NEVER good. Speaking about the increase in volatility, David Kelly, Chief Global Strategist and Head of the Global Market Insights Strategy Team for J.P. Morgan Funds says, “A step-up in volatility doesn’t make anyone comfortable.” Peter Kenny independent strategist at Kenny & Co adds that the smooth summer sailing is over, given there has been heavy volume on down days and institutional investors are net sellers in this slide.

 

According to Aaron Clark at : Portfolio Manager at  GW&K Investment Management, “The Fed’s in a tough spot, the governors want to hike but the window is closing,” the Fed can cry wolf so many times before it loses credibility and dilutes the power of “Fedspeak” in the future. David Kelly says a relief rally is likely if there’s no hike, but much depends on how the Fed explains its action or inaction. Ironically, the best outcome for stock markets could be a hike and an announcement that the Fed is likely done for the year.

 

 

 

All opinions presented are those of David Abuaf, and not of Raymond James or Forman Investment Services.

 

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