Browsing articles in "Weekly Market Update"

A Technology Driven Future

Jan 12, 2018   //   by Bruce Mason   //   Weekly Market Update  //  No Comments

Markets pushed higher yet again this week, continuing the momentum that picked up going into the end of last year.  We won’t have long to wait for confirmation of record holiday sales as companies begin releasing earnings in just a few days.  While it is likely a lot of the good news is already priced in at these levels, there will undoubtedly be some surprises awaiting us.

Let’s start with what is presumably good news.  Holiday retail sales smashed all expectations.  The National Retail Federation reports U.S. retail holiday sales increased 5.5% year-over-year to $692 billion to top by a wide margin the forecast for a 3.6% to 4.0% gain.  Online and other non-store sales were up 11.5% to $138.4 billion to account for 20% of all sales during the period.  The flip side of the coin is that before the holiday season even started, U.S. credit card debt stood at $808 billion as of the end of the third quarter.  That’s $280 billion more than the previous high hit in 2008, at the height of the financial crisis.  We all know how that ended.  The real benchmark is $1 trillion and it is probable it will be reached this year.

Among the things that I spend a lot of time considering is what the future holds.  While much of that time is spent on market levels and economic data, the real fun is considering the trends and advancements in technology.  In that light, this week the Consumer Electronics Show (CES) brought us one step closer to a future of talking toilets and snuggling robots.  Kohler introduced an Internet-connected toilet that can respond to voice commands.  For a mere $5,625 you too can have a toilet that you can tell to lift the seat or play your favorite soundtrack.  Plus, it keeps track of water usage.  For $600 you can purchase a robot by Somnox that just wants to cuddle.  It is a bed companion that simulates human breathing and is marketed as a tool to alleviate anxiety and help you get to sleep faster.  Perhaps most intriguing is the idea of a robot that folds laundry.  Two companies each introduced robots that tackle this tedious chore.  Foldimate promises to fold a load of laundry in 4 minutes, while Laundroid folds a whole drawer of clothes.  Sadly, neither can tackle socks or bedsheets yet but can be had for $980 and $16,000 respectively.  Self-driving cars are so old news.

In company news, a class action lawsuit against Starbucks was thrown out by a U.S. federal court.  The suit alleged the company was cheating customers by under-filling drinks and overloading them with foam.  This isn’t the first court to strike down a motion against Starbucks’ portions.  Pro tip: Ask for no foam.  IBM topped the list of U.S. patents for the 25th consecutive year.  It received a record 9,043 patents in 2017, while Samsung came in a distant second with 5,743.  Other members of the top ten include Canon, Intel, LG Electronics, Qualcomm, Google, Microsoft, and Taiwan Semiconductor.  IBM’s patents include 1,900 for cloud-related tech, 1,900 for artificial intelligence, and 1,200 for cybersecurity.  IBM has now surpassed 100,000 U.S. patents issued from 1993 to 2017.

In closing, since we’re talking about the future in this week’s installment, let’s talk about drones.  We learned both the Los Angeles Police Department (LAPD) and New York State Police will start deploying drones this year.  New York State Police launched its first aerial drone program to help support law enforcement missions like public safety, disaster response, and traffic safety.  The LAPD plans to use drones of varying sizes and capabilities depending on the mission, but were more ambiguous with the details.  The use of drones is a contentious issue for law enforcement and one that has Orwellian overtones.  Technology has impacted our lives in millions of ways, from how we communicate to how we shop.  But, it may soon be used in ways only previously seen in sci-fi movies.  Just this week I heard a report of a company looking at using artificial intelligence to prevent crimes before they happen.  I couldn’t help but think about the movie Minority Report and the TV series Person of Interest.  While the future holds great promise, and technology will undoubtedly usher in a better tomorrow, it is worth paying attention to the impact technology will have on our future.  Now you know.

January 12, 2018

A Year of Surprises

Jan 5, 2018   //   by Bruce Mason   //   Weekly Market Update  //  No Comments

Is everyone as excited about what 2018 has in store as I am?  2017 had its fair share of surprises but turned out to be a pretty fantastic year.  A number of records were set with regard to stock market levels and while the Federal Reserve started slowly tightening, it had little impact on dampening the enthusiasm shared by investors.  Before we resume our normal weekly recap, let’s take a moment to reflect on the big market events of 2017.

Among the most significant events last year were the Brexit negotiations and civil unrest in Catalonia, the future of U.S. trade with regard to NAFTA, the unraveling of the Dodd-Frank Bill regarding “too-big-to-fail”, corporate and individual tax reform, the U.S. economic boom and continuous records for stock indexes, cryptocurrency mania, media company mergers, net neutrality repeal, OPEC output cuts, Paris and Iran deal pullout, General Electric’s restructuring, the rise of Tesla, tensions with North Korea, the EU’s war on tax avoidance, and new Federal Reserve leadership.  What a year.

The natural question on everyone’s mind is what is in store for 2018?  Will U.S. stocks keep rising?  Which sectors will be hot?  Tax bill benefits or debt ceiling worries?  U.S. mid-term elections?  Will the oil rally continue?  Cryptocurrency surprises?  Next steps for monetary policy?  Dollar downturn?  Brexit and NAFTA?  Other trade agreements?  Lastly, how will the second year of Trump’s presidency shape the markets?  While we have ideas on some of these questions, it remains to be seen how 2018 unfolds.

Among the first hurdles we face is hitting the debt ceiling in approximately two weeks.  Congress has passed three short-term “stopgap” spending bills, one in September, one in early December, and the latest just before Christmas.  However, if both parties can’t reach an agreement by January 19th, it is conceivable we could have another government shutdown like the one that occurred in 2013.  Among the biggest hurdles is the need for a debt limit increase (on the back of the recent tax cuts), and the expiration of DACA protections for Dreamers in March affecting nearly a million young unauthorized immigrants.

In economic news, 2017 had the lowest annual number of job cuts since 1990.  Employers announced only 418,770 for the entire year.  Retail tops the list of job cuts with 76,084 jobs, followed by healthcare which announced a reduction of 40,732.  On the flip side, employers hired 1,100,654 people during the year representing a 27% increase over 2016.  Perhaps most encouraging, due to the tight labor market and recent tax reform, several industries are raising their minimum wage and offering better benefits including the return of the 401k match.  Most prominently, the financial services industry (primarily banks) are raising the minimum wage to $15 across the board.  Over 100 large companies announced bonuses of $1,000 or more for all their employees, increased wages, or pledged large charitable contributions.  We haven’t seen this level of largesse in quite some time.

In company news, the story remains largely focused on a select few companies.  Amazon, Facebook, Google, and Tesla continue to garner the lion’s share of the media.  In particular, there are large swathes of the media devoted to figuring out which industry Amazon will disrupt next and those companies Amazon may next acquire.  Always an entertaining character, Elon Musk continues to make wild projections for Tesla with all manner of hype, while simultaneously burning through $2 billion in cash each year.  Cryptocurrencies, while derided by the mainstream media, quickly became headline news as the price of Bitcoin skyrocketed from $1,000 to $20,000.  If 2017 was the year for Bitcoin, I suspect 2018 will be the year for alternative cryptocurrencies.  Whether this is a bubble or the beginning of a shift toward digital currency, we’ll have to wait and see.

In closing, within the first few trading days of 2018, another major milestone was accomplished – Dow 25,000.  While we don’t know exactly what will happen this year, we have an idea of some of the issues and opportunities we face.  As always, we remain vigilant and hope to remain ahead of the stories as they unfold.  Happy New Year!

January 5, 2018

Hurtling Toward 2018

Dec 1, 2017   //   by Bruce Mason   //   Weekly Market Update  //  No Comments

While the market has had an unusual lack of volatility this year, this week was a different story.  It appears Republicans are close to having enough votes to push the Senate’s tax reform bill through perhaps even as you read this.  While there may be strong opinions about the merits of cutting taxes, and increasing the national debt at a time when the economy is growing strongly, it goes without saying that the stock market always likes the idea of lower taxes.  The markets took this news and ran with it, pushing the Dow Jones Industrial Average (DJIA) past 24,000 for the first time ever.  However, on the heels of this news was also the announcement that Michael Flynn pleaded guilty of lying to the FBI and perhaps has incriminating evidence and testimony against President Trump.  With that simple turn of events, the mood soured almost instantly.  The market looks to retain most of the gains this week, but count on DC drama making the ride a little bumpier.

So why do I say the economy is growing strongly?  For starters, Gross Domestic Product (GDP) is growing by over 3% annually for the first time in almost a decade.  This metric is a measure of economic activity and is the yardstick by which most economists determine the health of the economy.  In conjunction with GDP, economists also look at inflation which remains very low and indicates the Federal Reserve has room to hike rates again at its next meeting in less than two weeks.  And lastly, unemployment is 4.1% which by most economists’ definition suggests the economy is at full employment.  Namely, anyone who wants to work can get a job.  Additionally, this week we learned that new home sales are soaring, growing to a decade-high 685,000 in October.  This is up 6.2% month-over-month and a whopping 18.7% above October one year ago.  Consumer confidence rises well above expectations and the Richmond Manufacturing Survey doubles expectations in November.  With numbers like these, the only concern might be that the economy is growing too fast.  While it is unlikely that it overheats in the next quarter or two, it is worth watching for in the second half of 2018.

In retail news, Black Friday and Cyber Monday sales beat expectations and suggest this will indeed be a Merry Christmas.  According to Adobe, Cyber Monday hit record revenues of $6.59B, making it the largest U.S. online sales day ever.  In comparison, Black Friday and Thanksgiving Day brought in $5.03B and $2.87B in revenue respectively.  The internet holiday shopping season has so far driven a total $50B, a 16.8% increase, and Adobe predicts it will be the first-ever season to break $100B in online sales.  You may be thinking, what about brick and mortar stores?  And you would have a point.  The migration of shopping to online retailers has disrupted traditional big box and mall stores.  Interestingly, Wal-Mart may be closing in on Amazon.  Seeking to regain its low-price leader title, Wal-Mart is now within striking distance of matching Amazon for the first time.  Supporting this thesis, Costco posted an eye-popping double-digit gain in comp store sales and 39% growth in its e-commerce channel in November.  The winners will be those retailers that can merge a robust online ability with a strong local presence.

Since I haven’t talked about Tesla in a while, I thought I’d share some recent news.  Tesla is about to turn on the world’s largest battery which some call a lithium-ion revolution.  It recently installed the world’s largest battery in South Australia and is expected to supply power to 30,000 homes.  However, it is worth noting that although Elon Musk gets a lot of attention, Tesla is not alone in this industry.  In fact, there are several companies that are on par or larger than Tesla in the field of batteries, including Panasonic and Hyundai.  In fact, Hyundai Electric & Energy Systems is building a 150-megawatt unit, 50% larger than Musk’s, that will go live in about three months in Ulsan, South Korea.  With all the publicity Tesla gets, it is easy to forget that this upstart company has competition from much larger rivals.  It is truly a story of David versus Goliath.

In closing, I want to point out that the Dow closed above 24,000 for the first time Thursday, marking a record fifth time in 2017 the index hit a 1,000-point milestone.  After closing at 20,000 on January 25, 2017, the Dow roared to 24,000 in 10 months.  By comparison, the run-up from 16,000 to 20,000 took more than three years.  The jump from 23,000 to 24,000 took just 30 days of trading.  This has been an unusual year in more than one respect.  While we are confident that economic conditions continue to do well the next couple of quarters, we remain vigilant for any warning signs in the coming year.

December 1, 2017

Olde West Chester Christmas Walk

Nov 17, 2017   //   by Bruce Mason   //   Weekly Market Update  //  No Comments

There are a lot of macroeconomic events which we could talk about.  For example, Venezuela falling into default, the end of Mugabe’s thirty-seven-year reign over Zimbabwe, and President Trump’s recent trip to Asia.  Other topics might include the faltering NAFTA negotiations or perhaps the tax bill that passed in the House of Representatives this week.  Some might find interest in General Electric’s long and slow downfall, or perhaps the surprise announcement that the P&G proxy battle did, in fact, go to Nelson Peltz.  However, with the temperatures falling and Thanksgiving less than one week away, my thoughts have turned to the approaching holidays and the realization that another year is quickly coming to an end.

With this in mind, I am going to forgo the usual political, economic, and financial commentary and instead give you a poem on the theme of thanksgiving.  This poem is written by Ella Wheeler Wilcox who was born in 1850 in Johnstown, Wisconsin.  It is said she was published by the time she graduated high school.

Thanksgiving
Ella Wheeler Wilcox

We walk on starry fields of white
And do not see the daisies;
For blessings common in our sight
We rarely offer praises.
We sigh for some supreme delight
To crown our lives with splendor,
And quite ignore our daily store
Of pleasures sweet and tender.

Our cares are bold and push their way
Upon our thought and feeling.
They hand about us all the day,
Our time from pleasure stealing.
So unobtrusive many a joy
We pass by and forget it,
But worry strives to own our lives,
And conquers if we let it.

There’s not a day in all the year
But holds some hidden pleasure,
And looking back, joys oft appear
To brim the past’s wide measure.
But blessings are like friends, I hold,
Who love and labor near us.
We ought to raise our notes of praise
While living hearts can hear us.

Full many a blessing wears the guise
Of worry or of trouble;
Far-seeing is the soul, and wise,
Who knows the mask is double.
But he who has the faith and strength
To thank his God for sorrow
Has found a joy without alloy
To gladden every morrow.

We ought to make the moments notes
Of happy, glad Thanksgiving;
The hours and days a silent phrase
Of music we are living.
And so the theme should swell and grow
As weeks and months pass o’er us,
And rise sublime at this good time,
A grand Thanksgiving chorus.

In closing, I want to invite everyone to come tomorrow to the Olde West Chester Christmas Walk.  This will be our ninth year participating and enjoy seeing everyone partake in this festive event.  It is open to the public and runs from 2 pm to 8 pm.  The parade is the highlight of the day and should not be missed.  It starts at 7 pm and makes its way down Cincinnati-Dayton Rd. Our office is the perfect place to view the parade as it marks the mid-point of the route.  As always, we will have a nice offering of cookies and warm cider and a balloon artist for the kids.  We hope to see you tomorrow!

November 17, 2017

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