News for the Week of September 4 – September 8, 2017
by David Abuaf, CFA
Investment Manager, RJFS
General Markets / Economic
1. China declared initial coin offerings illegal, sending the prices of the leading digital currencies tumbling
2. Investors in Asia and Europe moved into haven assets and sold stocks after North Korea’s nuclear test
3. Gasoline prices at the pump hit a fresh two-year high, but the futures market signaled that the supply crunch will soon ease!
4. Low inflation readings are giving Fed officials second thoughts about another rate increase this year
. The Fed has a dual mandate – they are required to 1) keep inflation in line, typically between 1% and 2% and, 2) keep full employment in line (typically around 4.5-5.5% unemployment – we can discuss why unemployment exists in a ‘full employment’ setting at a later date).
5. The ECB signaled it is likely to announce plans for phasing out its stimulus next month
1. The World Trade Organization (WTO) decided that a subsidy from Washington State to Boeing didn’t violate international trade rules
2. Equifax said hackers gained access to some of its systems, potentially compromising the personal information of roughly 143m US consumers
3. Amazon launched a plan to establish a second headquarters in North America, setting of a competition to lure the new hub
4. Facebook said it found ‘inauthentic accounts’ responsible for $100,000 in ad spending that it believes have ties to Russia, after a review in response to election concerns
· Turns out that Parrots, the most popular pet after dogs and cats, isn’t always man’s best friend. There are now organizations designed to teach people how neurotic these creatures can be, they bully, they bite, they pluck out their own feathers!
Commentary for the Week of September 4 – September 8, 2017
by David Abuaf, CFA
Investment Manager, RJFS
Despite the suffering brought by a trifecta of natural disasters, and the shock of seeing Trump teaming up with Pelosi to extend the debt-ceiling deadline, only nuclear tests by North Korea really shook the markets. And even then, it wasn’t much of a shock.
Dubravko Lakos-Bujas, head of US equity strategy at JP Morgan observes that the S&P 500 has dropped about 2% when hurricanes make landfall, as sectors that get slammed – think insurance, hotels, and cruise lines – are offset by ones that benefit, like autos, energy and equipment services. A failure to raise the debt ceiling or pass a budget, though has typically caused the market to drop 3% to 5%. “In essence, the market risk associated with the failure of passing the budget and addressing the debt ceiling has been pushed out for now” Bujas says.
Andrew Slimmon at Morgan Stanley notes that earnings expectations aren’t coming down, and forecasts generally drop by about 7% from the start of the year, not this year! At Friday’s close, that puts the index’s valuation at a more reasonable 17x earnings (S&P 500 index). “I don’t think that’s all that expensive, we have a setup for a decent rally in the fourth quarter” says Slimmon.
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.
The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Keep in mind that individuals cannot invest directly in any index. Individual investor's results will vary. Past performance does not guarantee future results. Investing involves risk and you may incur a profit or loss regardless of strategy selected.
To opt out of receiving future emails from us, please reply to this email with the word “Unsubscribe” in the subject line. The information contained within this commercial email has been obtained from sources considered reliable, but we do not guarantee the foregoing material is accurate or complete.