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News for the Week of Feb 5 to Feb 9, 2018
by David Abuaf, CFA
Investment Manager, RJFS
General Markets / Economic
1. The Bank of England said it is likely to raise rates at a swifter pace than it expected to just several months ago
2. The European Union raised its forecasts for eurozone growth, but also warned of market risks
3. Trucking companies in January ordered the most new big rigs in nearly 12 years, amid a hot freight market
4. Banks are shutting branches at a record pace as they leave less profitable areas and teller use declines
1. Amazon is preparing to launch a delivery service for businesses that would position it to compete directly with UPS and FedEx
2. Qualcomm rejected Broadcomm’s sweetened bid of more than $121B but opened the door to talks
3. Tyson’s CEO said rising freight and labor costs will lead to higher meat prices for US consumers
4. BlackRock is looking to raise over $10B to buy and hold stakes in companies replicating the approach of Berkshire Hathaway
1. Oh my, I just read a silly article how people are upset with Talenti Sorbetto. Not because of the taste, rather they like the taste but are complaining about how hard it is to open the plastic lid!
2. The trend amongst US high school Debaters is to now make their argument at 300 words a minute. I couldn’t even understand 5 words!
Commentary for the Week of Feb 5 to Feb 9, 2018
by David Abuaf, CFA
Investment Manager, RJFS
So, now we know what a correction feels like. Yes, it was painful, but there was a curious sensation about this one.
While the S&P 500 fell 5.2% on the week, on Thursday the S&P 500 had dropped more than 10% from its January 26 high, the definition of a correction, though it made back some of those losses on Friday.
And what a strange correction it has been. Unlike the past ones, this one was caused by fears of too much growth, rather than concerns there wouldn’t be enough. Economic data continues to come in strong with the Atlanta Fed GDP estimate of 4% growth this quarter and companies continue to report strong earnings and upbeat guidance.
According to Martin Fridson of Lehman Livian Fridson Advisors, “there is nothing pointing toward recession.” In spite of the fact that everyone was calling for a correction – I’ve personally heard way too many of those calls from people with no business even following the markets – the markets still need a narrative; and so, its latched on to the Fed being so far behind the curve that inflation will spike and bonds will soar.
History suggests that this correction isn’t the end of the bull market despite the chaos. In fact, trading action suggests that the market could be close to finding a bottom, with the S&P 500 holding its 200-day moving average and in fact creating a strong buying opportunity, says Robert Sluymer of Fundstrat. While it doesn’t mean the 200-day average will hold again, there is no reason to call the end of the bull market just yet.
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