by David Abuaf, CFA
Investment Manager, RJFS
Government / Political / non-Economic
- President Donald J. Trump and Vice President Michael R. Pence were sworn in to office on the west front of the United States Capitol on Friday
- Health and Human Services pick Tom Price told senators he would fight government regulations he said burden doctors and patients
- He did have quite a testy exchange with Bernie, rather fun to watch
- Several West African nations lined up troops on Gambia’s borders as its president refused to step down
- Islamic State has ramped up sales of oil and gas to the regime of Syria’s Assad
General Markets / Economic
- China issued a full-throated defense of international trade and economic integration in a speech at the Davos forum
- Some business and agricultural groups are lobbying Trump transition officials to salvage a Pacific trade deal
- The Consumer Price index poked above 2%, a sign of reduced slack in the economy that could support additional Fed moves to raise rates
- OPEC said its oil output fell in December after members agreed to reduce it
- This is actually less stupid than it sounds. Just because the members agree to do something doesn’t mean they always will! Iran and Venezuela – due to political strife and economic conditions – are typically the nations who don’t care what is agreed and do whatever they please
- The Fed delivered remarks on the US economy that suggested it is sticking to its plan of raising rates cautiously and gradually in the months ahead
- China reported 6.7% growth in its economy in 2016 with its strong push for easy credit and state spending
- The easy credit has been around a while and could hurt China soon unless they do something!
- The FTC sued Qualcomm, saying the firm engaged in unlawful tactics to maintain a monopoly on a type of chip used in cellphones
- BAT agreed to take full control of Reynolds in a $49.4B deal that marks renewed interest in the US tobacco market
- Italy’s Luxottica is merging with French lens maker Essilor in a deal that would give the combined firm 27% of the eyewear market
- Interesting tidbit, if you own glasses, odds are extremely high that your pair are made by Luxottica. Luxottica is the firm that handles all the manufacturing and outsourcing of frames
- IBM recorded its 19th straight quarter of falling revenue, as it struggles to offset declines in older businesses with sales in younger ones!
- Our favorite swindler, Bernie Madoff, has reportedly taken hold of the hot chocolate market in prison by buying up all the Swiss Miss hot cocoa packets!
- A man suffered burns after trying to set himself on fire outside Trump Hotel. I’m sure he was…trying to do something, but I neither care nor know what it was. I wonder if he expected to receive any burns – or in fact live – prior to setting himself on fire?
Commentary for the Week of 01/17/2017 – 01/20/2017
by David Abuaf, CFA
Investment Manager, RJFS
Chart from Barrons
Another tepid week in the markets with little movement amongst any index. The coming few weeks are likely to be more a sense of “has Trump intelligently described his plan – in detail?” it isn’t that we don’t know what his broad outline is – but investors are still trying to figure out what exactly will change and what the impact will be. If the market gets it wrong, then Jeff Rottinghaus of T. Rowe Price says “the market is susceptible to a correction!”
Over the past few weeks the major indexes have been quiet, but we might have gotten a glimpse of the future last week as individual stocks reacted to the confirmation hearings from Trump’s nominees; Wilbur Ross commenting that we need more tariff activity and Steve Mnuchin saying he didn’t support a plan to recapitalize the government backed enterprises and make them independent.
All that could take stocks on a roller-coaster ride during the first 100 days of Trump’s presidency. Brian Belski of BMO Capital Markets believes the Donald to be aware of recent history – how easy it is for a united government to become divided again at the mid-term elections – and will try to get a lot done quickly (one need only look at Trump’s list of executive orders for this week!). “That’s setting the stage for surprises in both directions, but the market is making a big mistake if it bets on gridlock,” according to Belski. Long story short, change is coming, whether the market likes it or not!
All opinions presented are those of David Abuaf, and not of Raymond James or Forman Investment Services.
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