News for the Week of January 2-5, 2018

News for the Week of January 2 to January 5, 2018

 

by David Abuaf, CFA

Investment Manager, RJFS

 

Happy New Year!!

 

General Markets / Economic

                                                                                                           

1.     The unemployment rate in some metro areas stands near or even below 3%, and the tighter labor market is leading firms to raise pay to attract employees

·       It should also lead to the Fed raising rates, quickly; 3% unemployment is well below “full employment”, this is not good from a macro-economic standpoint

2.     Speaking of, Fed officials in December debated whether looming tax cuts might require them to raise rates more aggressively in 2018

3.     France’s minister for economy and finance said Paris is looking to China and Russia to act as a counter-weight to trade relations with the US and Britain

4.     EU antitrust regulators are taking a hard look at how companies stockpile and use so-called big data

 

 

Company News

 

1.     The parents of Sears and Kmart hasn’t run paid national television commercials since late November

2.      PricewaterhouseCoopers (PwC) was found negligent in connection with one of the biggest bank failures of the financial bank failures of the financial crisis, a federal judge ruled

 

 

Interesting News

 

1.      Bad news coffee drinkers. Fancy coffee shops are saying it is over for the “pour over,” the type of coffee maker where you pour hot water into a paper containing coffee grounds (sorry, I don’t really drink coffee too frequently)

2.      Super interesting. There is a new “Sport”; it’s slow smoking cigars and there are rules. You can’t speak for the first 5 minutes, you only have one chance to light the cigar for a total of 1 minute, you cannot ash for the first 30minutes.  Super interesting!

3.      Speaking of sports, a new study is highlighting that e-sports – literally video gaming – players are earning up to $1M a year and completely baffling parents. It also baffles me!

 

 

 

 

Commentary for the Week of January 2 to January 5, 2018

 

by David Abuaf, CFA

Investment Manager, RJFS

 

 

Last week made for an amazing beginning to the year as the major indexes were all up at least 2%. “I get the sense that people are starting to worry they’re missing out on something,” says Greg Woodard of Manning & Napier.

 

Even a tepid jobs report on Friday couldn’t stop the market’s rally. In fact, it fueled it. Never mind that the US economy added just 148,000 jobs in December, fewer than the 190,000 that had been predicted. It ended up being another Goldilocks report – strong enough to suggest that the economy continues to grow, weak enough not to have to worry about the Federal Reserve quickening its pace of rate hikes.

 

Still, it’s hard not to wonder if sentiment is getting a touch frothy. Leuthold Group CIO Doug Ramsey notes that bulls dominated the Investors Intelligence Sentiment Survey in 2017, averaging 77% over the course of the year. That’s the second highest 12-month average on record and only the 10th above 70%. But reading that high haven’t been great for future returns, with the S&P 500 averaging a decline of 0.2% in the following year. “A sentiment indicator with one of the longest histories already suggests investors could be disappointed in 2018,” Ramsey says.

 

And with all the recent upside, it’s easy to forget just what a selloff can look like. The S&P 500 has now gone 385 trading days without falling 5% or more from its 52-week high. According to Jason Goepfert of Sundial Capital notes, when those streaks end, the market drops and average of 8.7% over the next 30 to 40 days.

 

Let’s hope for the best!

 

 

 

 

All opinions presented are those of David Abuaf, and not of Raymond James or Forman Investment Services. All opinions are as of this date and are subject to change without notice.

 

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