July 17th, 2017
Here are several highlights from last week's market activity, as well as developing stories the investment team is following this week. As always, we remain committed to helping you navigate the ever changing investment environment.
The following highlights should not be viewed as a recommendation, nor is this a notification of an impending change in asset allocation. For more information, please contact your advisor with any questions.
- In the markets… Little excitement as markets once again advanced to near record highs. The DJIA finished the week at 21637.74, up +1.04% on the week. The S&P 500 closed at 2459.27, up +1.41% on the week. The NASDAQ finished up +2.59% on the week. U.S. 10-year Treasury ended the week yielding 2.32%. In the energy markets, crude oil settled at $46.54. Year-to-date the S&P 500 is up +9.85%.
- Fed Chair Yellen spoke positively about the US economy during her semiannual testimony to Congress. Her dovish tone helped to boost markets.
- Snap. and popular food delivery service IPOs, had a tough week as the companies watched their share price decline.
- In other news… Washington Recap: Trump Jr.'s emails show he and others met with Russians; another health care bill was introduced; and Chris Wray, potential FBI director, told Congress he would be independent.
- Brazil's ex-president and leading candidate, was found guilty of corruption.
- Good news: FDA approved a Novartis cancer therapy that can wipe out leukemia in some very ill children and young adults.
- And finally…Roger Federer won a record 8th Wimbledon championship.
- In the markets… Markets continue to digest last week's lackluster inflation data as we look towards this week's light economic releases. Unless there are any huge surprises in US data, markets will likely take their direction from any comments that come out of the European Central Bank, which meets this Wed-Thurs.
- China reports on 2nd quarter GDP and monthly retail sales.
- Earnings season is in full swing with Blackrock, Netflix, and eBay among those companies reporting earnings.
- In other news… The Senate is expected to vote on the health care bill and will look at tax reform.
- The Iranian foreign minister will give a speech in NYC about the Middle East.
- Investment Term of the Week: IPO - An initial public offering (IPO) is the first time that the stock of a private company is offered to the public. IPOs are often issued by smaller, younger companies seeking capital to expand, but they can also be done by large privately owned companies looking to become publicly traded. In an IPO, the issuer obtains the assistance of an underwriting firm, which helps determine what type of security to issue, the best offering price, the amount of shares to be issued and the time to bring it to market.
2017 – 2nd Half Investment Outlook
As noted in our first quarter commentary, the current turmoil in DC makes the second half of the year that much more difficult to forecast. We continue to believe a healthy U.S. economy will help to drive earnings growth. The recent sector rotation across equities is indicative of the reluctance of investors to pull capital from the market, another favorable force. Moreover, the Trump administration will continue to take actions to lower regulatory hurdles. Overseas, favorable readings on economies should persist as the Eurozone continues to reaccelerate.
While we believe there are many positive forces that can drive markets, there are several concerns that are keeping us up at night. They include, in no particular order, continued geopolitical tensions, stretched valuations in U.S. equities, central bank policy error and political setback in DC. U.S. equity valuations are particularly a concern as current levels may leave the market vulnerable to magnified downside moves should a surprise develop.
We would be remiss if we did not address the ongoing political headlines that so many investors seem to be attracted to, like moths to the flame. Yes, we are watching too. And yes, what goes on in the confines of DC does have an impact on our lives. But when thinking about investment implications most of what is making headlines these days may have limited impact on long-term investment horizons. Instead, we prefer to focus on what we believe are secular changes impacting the economy. Primarily, technological and demographic changes that are changing the way we consume goods and services. Technology's current deflationary pressure on the economic system is historic. The smartphone, a device many of us now take for granted, is a simple example that shows the impact of efficiencies created by technology. Just think, the amount of storage in an iPhone (see charts) would have cost $1.4M in 1991 – per phone! Game-changers, like your smartphone, or how (and what) Baby Boomers and Millennials will consume over the coming years will, in our opinion, will be most impactful on global economic growth and your investments.
Source: KPCB, Deloitte, Blackrock
With both positive and negative forces in mind, we continue to stress maintaining well diversified portfolios to assist in the mitigation of risk. Furthermore, we are pursuing strategies outside of the U.S. through managers that can source opportunities at a reasonable price and a reasonable risk. Lastly, as risk control is paramount, we will take measures to limit downside risk wherever appropriate, should markets enter a correction.
If you have any questions, please do not hesitate to call your advisor. Until we speak again, have a wonderful week!
These highlights should not be viewed as a recommendation, nor is this a notification of an impending change in asset allocation. For more information, please contact your advisor with any questions.
Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory and financial planning services offered through McGee Wealth Management, Inc. McGee Wealth Management, Inc. is not a registered broker/dealer and is independent of Raymond James financial Services.
The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of McGee Wealth Management and not necessarily those of Raymond James. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. . Investing involves risk and you may incur a profit or loss regardless of strategy selected. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The Dow Jones Industrial Average (DJIA), commonly known as "The Dow" is an index representing 30 stock of companies maintained and reviewed by the editors of the Wall Street Journal. The NASDAQ composite is an unmanaged index of securities traded on the NASDAQ system. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor's results will vary. Past performance does not guarantee future results.