News for the Week of May 8 – May 12, 2017
by David Abuaf, CFA
Investment Manager, RJFS
Government / Political / non-Economic
- Emmanuel Macron was elected president of France with 66.1% of the vote. The 39-year-old campaigned on promises to reform France’s economy and stem a tide of nationalism
- A North Korean and Chinese firm have had a joint venture since 2008, showing how easily Pyongyang has skirted sanctions
- The Pentagon has backed a plan to invest nearly $8B to bulk up the US’s Asia-Pacific presence
- Boko Haram freed 82 of the nearly 300 Nigerian schoolgirls it seized in exchange for militants. These girls have been held since 2014!
- Mexico rejected a report that deemed the country the world’s second deadliest conflict zone in 2016
- The US is beefing up join antiterrorism efforts with Turkey, in an apparent bid to calm tensions over a plan to arm Kurds
- President Trump fired FBI director James Comey. Quick; make illegal copies off those VHS and DVDs you rent 😉
- The Pentagon is pushing for over 3,000 additional US troops in Afghanistan for the fight against the Taliban and other militants
- Indonesia is seeking to ban a hard-line Islamist group that wants to establish a transnational caliphate
- Trump called on Russia and Ukraine to make peace, a day after meeting foreign ministers from both nations; spoken like my parents when my sister and I used to fight
General Markets / Economic
- Trading firms are exiting the US options market as volumes fall and costs rise, draining liquidity from the marketplace
- Indian outsourcing firms are applying for fewer US work visas as Trump tightens immigration curbs
- China’s exports increased for a second straight month in April, up 8% from a year earlier
- US import prices rose 4.1% in April from a year earlier, their fifth consecutive monthly increase
- The ECB said around 15% of eurozone workers are jobless or underemployed.
- First time buyers are rushing to purchase homes after a decade on the sidelines, which could kick the housing market into higher gear
- Comcast and Charter are striking a wireless deal, as the cable giant seeks a piece of the cutthroat business
- Coach agreed to acquire Kate Spade for $2.4B, seeking to tap younger consumers amid slower growth in the handbag market
- Dad Joke Time:
- A guy walks into a bar and orders a fruit punch. The bartender says, “Pal, if you want a punch you’ll have to stand in line.” The guy looks around but there is no punch line.
- Knock-Knock. Who’s there? Dishes. Dishes Who? Dishes Sean Connery
- How did the hipster burn his mouth? He ate the pizza before it was cool
- Some people think it’s romantic to carve their names on trees in the park while on a date. I’m more worried about why they’re bringing a knife on their date!
- This is my step ladder. I never knew my real ladder ☹
- The Penthouse Executive Club – Men’s Lounge, in New York lost a lawsuit in which they now have to pay $3.4M in taxes. They originally claimed that the strippers were in fact “therapists that liked to dance” – they lost the case!
Commentary for the Week of May 8 – May 12, 2017
by David Abuaf, CFA
Investment Manager, RJFS
A “scandal” broke out in Washington last week – firing of FBI director James Comey – but the market barely reacted; is it safe to say it wasn’t a scandal? Some headlines continued throughout the week, even drawing comparisons of Nixon.
It certainly was another yawner despite the pyrotechnics in Washington. However, it wasn’t all quiet; retailers like Macy’s and Nordstrom and JC Penney all suffered double digit losses after releasing earnings, but warns Daniel Chung of Alger, “don’t blame their disappointing sales on consumer weakness. It’s the internet, not lack of consumer strength.” As if we didn’t already know this? other earnings reports, however, suggest that the economy may be stronger than it looks.
The real question is all the low volatility we’ve seen lately with the VIX index (implied volatility of potion outstanding between 2 and 3 months) have fallen to near historical lows; the Dow Jones Industrial Average as well has had only four moves of 1% or more in either direction all year – the fewest since 1965! For some, extreme calm is like silence in a horror film – it means something terrible is about to happen. Not quite, says State Street Global’s Michael Arone, “volatility won’t stay this low, but it doesn’t necessarily mean it leads to a correction or a bear market!”
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.
The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stock of companies maintained and reviewed by the editors of the Wall Street Journal. NASDAQ composite is an unmanaged index of securities traded on the NASDAQ system. Index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor’s results will vary. Commodities’ investing is generally considered speculative because of the significant potential for investment loss. Their markets are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. VIX is the Chicago Board Options Exchange (CBOE) Volatility Index, which shows the market's expectation of 30-day volatility. It is constructed using the implied volatilities of a wide range of S&P 500 index options. It is a widely used measure of market risk. Inclusion of these indexes is for illustrative purposes only. Keep in mind that individuals cannot invest directly in any index. Individual investor's results will vary. Past performance does not guarantee future results.
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