News for the Week of March 6 – March 10, 2017
by David Abuaf, CFA
Investment Manager, RJFS
Government / Political / non-Economic
- Islamic State is using car bombs and human shields to fight Iraqi troops, as government forces advance deeper into Mosul
- The EPA plans to undo an Obama administration decision to lock in fuel-economy and emissions rules after auto-industry lobbying
- Want to know why I still distrust the PLO and Hezbollah, etc.? The PLO just named a youth summer camp after a terrorist who slaughtered 37 people – 12 of which were children
- Canada said it would extend its military mission in Ukraine in response to Russian aggression
- WikiLeaks released a trove of documents and files that it said exposes how the CIA hacks smartphones, computer operating systems, message applications, and internet connected TVs
- An array of conservative lawmakers and activist groups attacked a freshly delivered proposal by House GOP leaders to overturn the 2010 health law.
- I don’t get it. I honestly don’t. GOP, you had 8 years with a majority in Congress and a sitting president and you didn’t create a health care plan. Then a HC plan is created and you immediately bash it. You lost in the Supreme Court. Just make amendments to the thing!
- Trump’s nominee for the No. 2 post at the Justice departments wouldn’t commit to appointing a special prosecutor to probe any Russian interference in the 2016 presidential election
- North Korea tried to sell a form of lithium metal to unidentified international buyers last year, fueling proliferation worries
- South Korea’s president was ejected from office by the country’s Constitutional Court, following her impeachment and suspension over a corruption scandal. So, South Korea’s first female president was also the first to be impeached!
General Markets / Economic
- Central banks around the world are increasing foreign currency reserves, highlighting the fragile underpinnings of the global economic recovery. However, an accelerating European economy has rekindled a war of words between top monetary officials
- The US posted its biggest monthly trade deficit in nearly five years in January
- Household net worth in the US climbed to a record $92.8T in the fourth quarter, aided by the end of year sure in stocks
- Corporate insiders are buying stock at the slowest pace in at least 29 years, a sign of uncertainty about the bull market
- The ECB hinted at the beginning of the end of its massive monetary stimulus, but stopped short of a significant move to rein it in
- GM’s sale of Opel to France’s Peugeot likely eliminates a source of low-cost funding for the US firm’s car-lending business
- Bird flu hit a Tyson linked chicken farm, the first strike on a commercial poultry flock in over a year
- IBM and Salesforce agreed to mingle artificial-intelligence technologies
- Shell is selling nearly all of its Canadian oil-sands developments in deals worth $7.25B, another step in a bid to cut debt and streamline
- AIG’s chief quit at a board meeting where his future was being discussed, apparently having lost the faith of the insurer’s directors
- Authorities in NJ arrested a man who is wanted for $51,000 in unpaid tolls and fees. A rather mundane story. Here’s the messed-up bit: only $10,850 is for tolls, $40,100 is in fees!!
- IMDB is now adding a rating of “F” to identify films that are feminist friendly
Commentary for the Week of March 6 – March 10, 2017
by David Abuaf, CFA
Investment Manager, RJFS
Chart from Barrons
The S&P 500 ended a six-week winning streak as tumbling oil prices and a looming Federal Reserve rate hike caused stocks to stumble. All three major indices fell this week, though only slightly (Nasdaq at 0.2%, Dow at 0.5% and the S&P 500 at 0.4%), but it’s a wonder the losses weren’t any bigger. The week started with the release of the widely criticized Republican plan to repeal and replace Obamacare and ended with a jobs report that has increased the likelyhood a rate hike at the next Federal Open Market Committee meeting along with oil dropping below $50 a barrel.
The downward pressure on the market was limited, in part because of the strength of the employment data, which was neither too hot nor too cold. However, the data is showing what we’ve all known and suspected for a while – “the economy is growing and one rate hike is unlikely to do much damage,” says Michael Darda at MKM Partners, he also called the coming Fed meeting as “largely irrelevant.” I always love it when other folks in finance are as cynical as I am!
There’s still a strong likelihood of some sort of economic stimulus plan from the Trump administration sometime this year. According to Richard Bernstein of the eponymously named company, “the fact that tax cuts and infrastructure spending are even being considered at a time when the US economy is adding 200,000 plus jobs a month is unprecedented; we’re going to add more stimulus on top of this!”
Still, a sense of unease hangs over the market, especially after the price of oil fell 9.1% last week, sinking to its lowest level since November. Binky Chadha at Deutsche Bank believes the market is due for a 3-5% sell off shortly, but just because it is due for a correction doesn’t mean we’ll get one. According to Chadha, “just because sentiment has played a big part in the rally, so has the fact that investors didn’t appreciate recent economic strength. As long as that continues, bouts of weakness should remain relatively muted as consensus forecasts have underestimated the recent rebound in growth and remain subdued, suggesting positive surprises are likely to continue in the very near term.”
All opinions presented are those of David Abuaf, and not of Raymond James or Forman Investment Services.
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