News for the Week of September 11 – September 15, 2017
by David Abuaf, CFA
Investment Manager, RJFS
General Markets / Economic
1. China is preparing to shut down bitcoin exchanges, reflecting unease with the virtual currency and its recent surge in value
2. China is starting to unwind some measures aimed at bolstering the yuan after the currency’s recent surge began taking a toll on exporters
a. A higher currency means FOREIGNERS need to pay more of their money for YOUR goods. Because it costs YOU more money, you will buy less of that product, making it worse for the exporters in the original country!
3. The Department of Transportation said it will keep a hands-off approach toward autonomous-car regulation, even as Tesla technology was faulted in a crash
1. Apple unveiled its new iPhone X, which comes with a larger display and facial-recognition technology, and will cost $999
2. Google plans to end its “first click free” policy that enables users of its search engine to bypass paywalls on news websites
1. A Pizza “festival” was held in NYC with attendees paying upwards of $75 for pizza. Turns out the pizza they received was cold and small (literally smaller than the size of a palm, I’ve seen pictures), with some folks waiting up to 6 hours to received said “pizza.” Obviously, the attendees are looking to recoup money, the NY State attorney general is already on the case, a rather hilarious story! My favorite quote:
“It was nothing but Jesus [that] stopped me from flipping over those tables. I drove all the way from Albany with my brother. I will be contacting my credit card company…[blah blah blah, more complaining]… I also pray for them, because God will deal with them accordingly!”
2. A Michigan teenager shot his mother to death last week, while she slept (because while she’s awake she can fight off a bullet?) because the woman wouldn’t let her son have a puppy! The kid was 19 years old, mentally capable. Jeez luiz, I think the mother should have compromised and let him buy a goldfish.
Commentary for the Week of September 11 – September 15, 2017
by David Abuaf, CFA
Investment Manager, RJFS
Hurricane Irma caused severe damage to the Southeast, but it was nowhere near as brutal as forecasters had expected. North Korea continued to fire missiles even as the United Nations ramped up sanctions on the country, but the launch had little apparent impact on US traders.
Keith Lerner of SunTrust notes “a lot of investors were caught offsides heading into September.” This is likely due to September being historically a rough month for the stock market, coupled with investors already getting more and more defensive during the month. He continues, “there were a lot of correction calls, because people know that September is seasonally a weak month. You started to see people positioned for a downturn.” According to a survey by Bank of America, Global fund managers are trading out of US stocks, reducing their holdings to the lowest level since 2007. Additionally, they are more overweight emerging market stocks than they have been in seven years, along with a higher than average allocation to cash and more have taken out protection against a market drop.
While each of those data points sounds bad, it’s almost difficult to come to any one conclusion. Namely, if you’re worried about a market drop, go more to cash, but don’t go more into non-US stocks. The same line of reasoning is if you are worried about a market drop and go more into cash, how do you have more money to protect yourself from a market fall? As such, by market logic that bearishness is rather positive about US stocks as there are more opportunities for positive surprises.
This week, the Federal Reserve will meet. Investors will be watching what Chair Janet Yellen says about the agency’s plans to shrink its balance sheet and any hints about whether the Fed will raise rates in December. Traders are increasingly confident that another rate hike is coming this year, with the market pricing a 47% chance.
All opinions presented are those of David Abuaf, and not of Raymond James or Forman Investment Services
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