News for the Week of May 30 – June 2, 2017
by David Abuaf, CFA
Investment Manager, RJFS
Government / Political / non-Economic
- SCOTUS reaffirmed that patent holders can’t keep their rights over a product once they sell it
- The Pentagon conducted a successful test of a system designed to shoot down an ICBM, US defense officials said, a demonstration that came amid rising tensions over North Korea’s nuclear-weapons program
- Trump urged a change to Senate rules to let all bills pass with a simple majority, in hopes of advancing his tax and health care agenda
- The EU’s executive body proposed a steep rise in spending for 2018, the last full year of UK membership
- The House intelligence panel issued seven subpoenas, in a sign that its Russia investigation is advancing in scope and intensity
- Turkey is expanding efforts abroad to capture Erdogan opponents by canceling passports and nearly netted an NBA player last week
- NASA announced that it will launch and unprecedented mission to fly directly into the sun’s atmosphere
- Trump said he would withdraw the US from the Paris climate accord in an effort to boost US industry and independence, making a dramatic shift in policy despite lobbying from business leaders and close allies
General Markets / Economic
- The Fed is set to raise rates at its June meeting, but could defer an expected September move if there are debt-ceiling frictions
- Americans ramped up spending in April at the fastest pace in four months, fresh evidence that the US economy is rebounding
- Americans refinancing their mortgages are taking cash out in the process at levels not seen since the financial crisis
- Economic growth slowed across parts of the US in recent weeks, according to the Fed’s beige book
- The beige book is a summary and analysis of economic activity. Each district summarizes information and passes it upstream to the Fed, which publishes the aggregate book
- Daimler said it is boosting use of parts from US based suppliers; a sign of administration pressure on car firms
- Wanna know why YOU didn’t get into Yale? Because you didn’t write an application letter about Papa John’s pizza. Carolina Williams wrote her application essay about Papa John’s, had a hand-written acceptance letter, but of course, she chose Auburn instead. ☹ It was a 200-word essay; which of course I read. Honestly, it was pretty bad; she must have had good grades as well 😉
Commentary for the Week of May 30 – June 2, 2017
by David Abuaf, CFA
Investment Manager, RJFS
The bull case for stocks took its biggest hit of the year last week, but nothing seems able to prevent this market from reaching new highs. While the S&P 500 rose 1% on the week, economic data cast shade on what has kept many investors bullish on stocks this year. Despite the death of the so-called Trump trade – the idea that stocks would get a boost from tax cuts, fiscal spending, and deregulation – optimistic investors could always point to a potential pickup in economic growth, even without policy action. Friday’s payrolls report, which showed that a mere 138,000 US jobs had been created in May wasn’t exactly fatal for that view, but it certainly presents a quandary.
Still, the Federal Reserve Bank of Atlanta’s closely watched GDPNow forecast model is predicting second-quarter economic growth of 3.4% - none too shabby, unless compared to the 4% it was predicting the day before the payrolls data were released.
But what alternatives do investors have? The 10-year Treasury note yields just 2.16% and with payouts that meager, stocks still possess their charms, especially when the US economy continues to growth modestly and the rest of the world looks stronger, says Manning & Napier senior analyst Greg Woodard. “Equities seem to be a reasonable investment, the path of least resistance.”
That may be less worrisome than it sounds as Doug Ramsey of Leuthold Group notes that the market’s rally is quite broad, despite concerns that too many of the recent gains have come from industry giants. Even the advance/decline line, a measure of advancing stocks versus declining ones, is sitting at a record high, something that has historically meant that a bull market has at least another three to six months to go. Ramsey says, “I tend to like rallies that are somewhat mysterious, it means that the market is anticipating good news that we’ll read about weeks or months down the road.” It’s just a question of what the good news will be!
All opinions presented are those of David Abuaf, and not of Raymond James or Forman Investment Services.
This information is not a complete description of the securities, markets, or developments discussed and has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein.
To opt out of receiving future emails from us, please reply to this email with the word “Unsubscribe” in the subject line.