News for the Week of 10/03/2016 – 10/07/2016
by David Abuaf, CFA
Investment Manager, RJFS
Government / Political / non-Economic
1. Colombia’s voters rejected a peace accord between the president and FARC that would have ended 52 years of conflict!
2. The UK’s May said her nation would trigger the formal process of disentangling itself from the EU by the end of the March
3. Federal agents have persuaded police officers to scan license plates to gather information about gun show customers
4. The Obama administration withdrew from talks with Russia over a failed Syria cease-fire deal saying that Russia’s role in the bombardment of Aleppo left nothing more to discuss
5. Turkey is extending the state of emergency they declared after the “failed coup” by three more months
6. An NSA contractor has been charged with stealing classified secrets
· Turns out he was part of a government hacking team!
7. Germany is considering a push for EU sanctions against Russia in response to its behavior in Syria
8. US traffic deaths have surged, raising fresh concerns about distracted driving
General Markets / Economic
1. As US drug prices rise, drug-makers are playing down their role, instead blaming the middlemen who help determine pricing
2. Many analysts say a proposed cut in OPEC oil output isn’t big enough to address a supply glut
3. Shares in some small firms will start trading in five cent rather than once cent increments Monday, in an adjustment to “tick” sizes
4. Auto sales sputtered last month despite generous deals, with most of the market’s biggest sellers posting drops from a year earlier.
1. Bass Pro Shops struck a deal to acquire Cabela’s, combining two big sellers of outdoor-sports gear. I’d be curious to see what happens with Dick’s and Sports Authority – a merger wouldn’t go through between them, but I’d be curious what approach they each now take to acquire mom and pop stores
2. Garden Fresh Restaurant filed for chapter 11 protection with plans to sell to lenders
3. Twitter is expected to field bids this week, and Salesforce CEO Benioff has been building a case that his company should be the buyer
4. Google unveiled new smartphones and detailed its latest efforts to infuse artificial intelligence into more of its products
5. Theranos said it will shut down its blood-testing facilities and shrink its workforce by over 40%
6. China Shipping and Cosco plan to combine 11 shipbuilding yards as orders for new vessels hit a record low
7. Merrill Lynch will require that retirement investors pay a fee based on their assets, ending the option of paying commissions for trades
8. 7-Eleven plans to expand its North American convenience store business
1. An Italian mafia fugitive was found hiding in a secret room, in his home, years after he became a fugitive!
Commentary for the Week of 10/03/2016 – 10/07/2016
by David Abuaf, CFA
Investment Manager, RJFS
Chart from Barrons
Stocks slipped last week as investors fretted over the possibility that interest rates around the world will rise more quickly than the market has anticipated.
The headline economic news was generally strong as the economy added 156,000 jobs and the workforce expanded while wages rose; both manufacturing and nonmanufacturing production grew in the US. But the positive data did little to boost markets.
There were essentially two conversations going on among investors: a relatively hopeful one about continuing jobs growth and a rebound in manufacturing, and a gloomy on raising the specter of higher rates. During the week public officials hinted that the era of ultralow interest rates are nearing its end; as European Central Bank officials denied a report they were considering ways to wind down their bond purchases.
According to Peter Boockvar at Lindsey Group, “you’re seeing clear evidence that central banks are running out of steam.” Without continued stimulus from central banks, investors will have little patience for companies that can’t increase their earnings consistently.
Rate anxiety was also evident in the kinds of stocks that fell during the week. High-yielding companies such as telecom, utilities, and real estate investment trusts led the market lower. According to Jason Pride at Glenmede, “it’s all tied to this rate chatter…it’s like a whisper in the background.”
None-the-less, Pride says economic growth should continue to buoy markets in the longer run, “[A]t the end of the day we’re in an economic expansion, and it doesn’t look like its stopping. It’s slow, but it’s still going. That should carry risk assets [equities are considered risk assets].”
All opinions presented are those of David Abuaf, and not of Raymond James or Forman Investment Services.
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