News for the Week of August 28 - September 1, 2017

News for the Week of August 28 – September 1, 2017

 

by David Abuaf, CFA

Investment Manager, RJFS

  

General Markets / Economic

                                                                                                           

1.     Gasoline prices surged to a two year high at the pump, a sign of economic fallout from Harvey spreading throughout the US

2.     US inflation remained subdued in July while household spending rose, underscoring the conundrum faced by the Fed

3.     Packaged food firms are coming under pressure from retailers that are pushing big brands to lower prices

4.     The US economy expanded at its most robust pace in more than two years in the spring

 

 

Company News

 

1.     Well Fargo said its sales practice scandal was far broader than previously acknowledged, as it raised the tally of suspect accounts

2.     Uber’s new CEO said he is aiming for an IPO in 2019

3.     Cadillac sales are rising at the fastest clip since the Reagan administration, with demand driven by China

4.     Microsoft and Amazon plan to allow their voice enabled digital assistants to work together

5.     Apple is allowing Chinese customers to use mobile payment system WeChat Pay for App Store purchases

6.     United Technologies is near a deal to buy Rockwell for more than $20B; a tie up that would create an aircraft equipment giant!

 

 

 

Interesting News

 

·       10 years ago, Tiger, a pudgy orange tabby cat broke into a maximum-security prison in Westchester County. Tiger currently turns his nose up at tuna from the mess hall, but gladly chows down on tinned tuna inmates buy for him at the commissary. This prison is the infamous “Sing Sing”

 

 

 

 

 

Commentary for the Week of August 28 – September 1, 2017

 

by David Abuaf, CFA

Investment Manager, RJFS

 

 

It took a natural disaster to erase the market loses created by man-made ones. Heading into the last week of the month, the S&P 500 was sitting on a 1.1% loss and things were looking bad. Tensions with nuclear-armed North Korea loomed, along with fears of a government shutdown, nearly helped August live up to its reputation as a terrible month for stocks. Instead, the market rallied and the S&P 500 finished the month up 0.3%.

 

It’s strange to think we have to give Hurricane Harvey much of the credit for the market’s rebound. The storm has wreaked havoc across Texas, destroying cars and homes and upending people’s lives. But traders kept trading, and the market appears to view Harvey as a force that reduces some Washington risks instead of increasing them. Jason Ware of Albion Financial says “Harvey makes it less likely that we have a government shutdown, less likely we breach the debt ceiling, it’s reassured buyers that those concerns are unlikely to topple the market.”

 

So, August didn’t turn out nearly as bad as many feared, but its reputation for creating market wreckage pales in comparison to that of the ninth month. Over the last 50 years, the Dow has dropped 0.85% on average in September, according to Bespoke Investment Group data, with a decline occurring nearly two thirds of the time. and this September is chock full of potential land mines. The Fed is conducting its two-day policy meeting beginning on September 19, and there’s a good chance it will start shrinking its balance sheet. And even if the market is betting on the debt ceiling getting raised, that still needs to be done by the end of the month!

 

But September doesn’t have to be a death sentence. While the month has been historically bad, that doesn’t mean a decline is preordained, and in this case, past might just be prologue. Since 1983, the S&P 500 has dropped 2.6% on average when it was down for the year as September began, according to Bespoke. But when the benchmark entered September in positive territory, it averaged a positive finish, albeit a small one, for the month. And so far, the S&P is up 10.6% on the year!

 

 

 

 

 

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

 

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