Week of May 30, 2016
The domestic and international markets were broadly up, primarily driven by the boost in oil prices late last week. The S&P 500 and Dow Jones Industrial Average posted a 2.28% and 2.13% return, respectively, while the tech-heavy NASDAQ Composite bested both, returning 3.44% to investors.
China's Shanghai Composite was down slightly, off 0.16%, while Europe remains wary as investors count the days to Britain's referendum on whether to stay in the European Union.
U.S. crude oil went above $50 last week, marking the first time since November of 2015. The surge in price was primarily due to a reduction in the commodity's stockpile. The U.S. Energy Information Administration said last Thursday that the stockpile fell 4.2 million while the market was expecting a drop closer to 2.5 million barrels. In addition, U.S. production has fallen for 11 straight weeks to 8.8 million barrels-per-day, nearly 10% off it's peak of 9.7 million barrels-per-day. However, we would agree with analysts that the higher price of oil could mean that producers that were losing money at lower prices could come back online, effectively capping the gains in oil in the near term.
China appears to have stepped away from its August 2015 pledge to allow the Yuan to fluctuate more freely based on market-based factors. The People's Bank of China has not publicly stated the change, however, the central bank appears to be setting the Yuan’s value higher or lower based on what they think is best with an emphasis on stabilizing their currency. China has also stepped up internal methods to deter fleeing capital and a further devalued Yuan. This seems to be working because monthly outflows of capital fell to $28 billion in April from over $100 billion in December and January.
We have mentioned the Brexit vote in our past commentaries and felt it prudent to bring it up again now that it is getting closer. A play on the term "Grexit" where Greece had considered the possibility of leaving the European Union, the Brexit vote is Britain's chance to determine whether they will remain part of the economic and political organization headquartered in Brussels. As of this writing, the polls are close but it appears that a slight majority of people would vote to stay in the European Union. The UK Treasury has publicly stated that the British economy would be heavily impacted, going so far to say that a recession would be likely. However, those agitating for a Brexit say the UK Treasury's analysis fails to account for the benefits the UK economy would realize through less regulation and fewer barriers on international trade. Britain, the world's fifth largest economy, will likely experience market volatility leading up to and after the vote given the uncertainty.
Fun Story of the Week
Need to blow off a little steam? There's a company in Arlington, TX that might have just the thing for you. That is, if the "thing" is destroying a mock-up of an office complete with a desk and computer screen without effectively ending one's career. The company is called the Anger Room and they allow customers to come in for a set amount of time and lash out at various inanimate objects in entirely customizable rooms. Want to bash up a kitchen, or a waiting room or just pop a room full of balloons? Check, check and check. The company will also allow you to choose the tool of your choice, be it a hammer, baseball bat or something more creative. While not strictly "therapy", its patrons have raved about the service and the company is actively looking to expand into other metro areas. It must be extremely satisfying, and not to mention profitable, to allow customers to shove the keyboard through the computer screen as the Anger Room is currently looking to open up franchises.
Securities offered through Jacques Financial, LLC (JFLLC) a Broker-Dealer, Member FINRA and SIPC.Certain associates of Joseph W. Jacques, CPA, CFPTM are registered representatives of JFLLC. Joseph W. Jacques, CPA, CFPTM and JFLLC are affiliated. Investment advisory services are offered through Jacques Advisors, LLC an affiliate of JFLLC. Tax services are offered through Jacques & Associates Certified Public Accountants, LLC an affiliate of JFLLC.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. This newsletter was written and prepared by CWM, LLC.
The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.
The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.
S&P 500 INDEX
The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
SHANGHAI COMPOSITE INDEX
The Shanghai Composite Index is a market index of all stocks (A shares and B shares) that are traded on the Shanghai Stock Exchange. It tracks the largest publicly traded companies in China.
Wall Street Journal, May 2016. http://www.wsj.com/articles/china-preferring-stability-to-free-markets-loses-resolve-to-revamp-currency-1464022378
Financial Times, May 2016. https://www.ft.com/intl/cms/s/0/b4bf100a-1e9d-11e6-b286-cddde55ca122.html#axzz49Uc0GyFp
Wall Street Journal, May 2016. http://www.wsj.com/articles/brexit-could-leave-economy-3-6-smaller-says-u-k-treasury-1463996928
Wall Street Journal, May 2016. http://www.wsj.com/articles/oil-at-seven-month-high-as-u-s-stockpiles-drop-1464168624
Wall Street Journal, May 2016. http://www.wsj.com/articles/brent-crude-rises-above-50-a-barrel-1464229441
Anger Room, 2016. http://www.angerroom.com/