Week of February 13, 2017
Despite a flat outlook on the market this week, President Trump was able to evoke a bullish sentiment, propelling all three major U.S. indices to new highs late in trading session. The S&P 500 ended the week up 0.81%, bested by the Dow Jones Industrial Average and the NASDAQ Composite which were up 0.99% and 1.19%, respectively.
On Thursday, President Trump said he would announce a new plan for taxes in the weeks to come, renewing speculation that his policies would help boost economic growth. Overseas, China’s trade data handily beat expectations, lifting the share prices in commodity based industries across European markets as well. We would note that, with significant political risk on the horizon, the Eurozone markets have been struggling for direction over the recent weeks. The French election and speculation of a possible ‘Frexit’, similar to Britain's referendum on EU membership last June, hindered the Euro this week as polls indicate Marine Le Pen is projected to win the first round of France’s presidential election. The British pound, however, surged against the Euro and the U.S. dollar as the UK Parliament gave a green light to start the formal Brexit process. The currency also got a boost from Bank of England policy maker, Kristin Forbes, who stated that a rise in interest rates is in the foreseeable future.
What are we reading?
Below are some areas of the market we paid particularly close attention to this week. For further information, we encourage our readers to follow the links:
China's January trade data blew away expectations
China posted stronger-than-expected trade data for January with a 16.7% surge in imports, easily beating expectations of 10.0% and marking the fastest pace in four years. Global export data showed that China is capturing growth through the manufacturing of commodities, boosting prices for resources such as copper and steel. It appears the trend in China is also echoed across the Asian region, indicating that manufacturing demand is likely increasing worldwide.
Trump vows 'phenomenal' tax announcement, offers no details
President Trump is expected to make good on his promise to lower taxes for U.S. corporations. The President has previously pledged to slash the U.S. federal corporate tax rate from 35% to 15%. The promised policy changes could push the U.S. economy higher if passed through Congress, however, corporate executives remain wary and are not counting on the cuts just yet.
MPs give Theresa May green light to trigger Brexit
The United Kingdom’s House of Commons passed the Brexit bill by an overwhelming majority of 372 versus 122. Prime Minister Theresa May expects to begin Article 50 negotiations, which gives any EU member the right to leave the EU. We would note that the Scottish parliament officially opposed starting Article 50 negotiations and, while the motion is not binding on Prime Minister May, it could lead to unrest if not.
Oil prices stable on OPEC-led production cuts, but bloated inventories weigh
OPEC members have stuck to their deal to cut production as member-countries, including non-member Russia, are working towards the agreed upon cuts of roughly 1.8 million barrels per day during the first half of 2017. While this is beginning to impact the oversupply issue, there are lingering fears that an increase in U.S. drilling may offset the benefits. Indeed, the most recent weekly data indicates that U.S. crude inventories increased by 13.8 million barrels, up 3.8% on a yearly basis.
Fun Story of the Week
With the New Year still in the minds of many, resolutions are normally driven towards physical and personal improvements. Often our goals are determined by our desire to be better than someone we see as a competitor, or even an entity that does something better than us. For Walmart, that competitor is Amazon. With the cloud-based giant Amazon gaining more and more market share every quarter, Walmart has made a New Year’s resolution to combat Amazon’s competitive advantage. Walmart plans to execute this resolution by offering free two-day shipping for purchases of $35 or greater, on close to two million products. In addition, Walmart will not charge an up-front membership fee for their services, thus differentiating themselves from Amazon. So, who will win the retail wars? Ultimately, the consumer with lower prices, cheaper shipping and more options, but ask Amazon's "Alexa" and she's sure to have an opinion!
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GENERAL DISCLOSURE
This newsletter was written and produced by CWM, LLC. 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. The views stated in this letter are not necessarily the opinion of Cetera Advisor Networks LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change with notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
DJIA
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.
NASDAQ COMPOSITE
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.
USA Today, January 2017. http://www.usatoday.com/story/money/2017/01/31/walmart-aims-amazon-free-two-day-shipping-offer/97260166/