Deconstructed Shoes

May 12, 2017   //   by Bruce Mason   //   Weekly Market Update  //  No Comments

While it was a politically newsworthy week, in truth there wasn’t much to move the market.  Investor complacency appears to be the norm while simultaneously the volatility index fell to a multi-decade low.  With first quarter earnings announcements all but finished, it seems investors are waiting to see what comes next.

While there wasn’t any one big news story, there were lots of smaller, perhaps more interesting stories this week.  I’ll go in chronological order.  Perhaps the most newsworthy story of the week was the runoff election in France.  We learned on Monday that Emmanuel Macron won 66% of the vote and is poised to become the youngest president in France’s history.  This victory helps solidify France’s place in the European Union (EU) and helped reassure investors that the EU isn’t falling apart.

You no doubt are aware that the current administration is hard at work dismantling regulations in various industries from the energy sector to the financial services industry.  This week we learned that the FDA is delaying a rule requiring restaurants to post calorie counts.  Dr. Tom Price, Secretary of Health and Human Services, approved the FDA decision noting the rules would be burdensome for the food services industry.  So much for making America healthy again?

As noted in the opening, the volatility index (VIX) fell to a 24-year low of 9.7.  The downward swing in this fear gauge is likely tied to the result of the French election and the general sideways action in global markets.  Perhaps the best explanation I found was from Convergex chief market strategist Nicolas Colas.  He stated, “Volatility is ultimately a mathematical measurement of human emotion on stock prices.  Emotions are by their nature unpredictable, which makes the VIX equally inscrutable.  All we know is that human emotions still exist, and therefore volatility will return.”

For those of you following cryptocurrencies, Bitcoin hit a new all-time high this week.  Bitcoin soared passed $1,800 only two days after breaking the $1,700 level and rising more than 300% this year.  What could be driving this move is the recent move by Japan to legalize the cryptocurrency as a payment method.  Russia is considering doing the same.  I’m not sure if the recent trend in blockchain currencies is a bubble, but it sure has that feeling.

There isn’t a week that goes by that Amazon doesn’t have some new concept or project.  The company announced it is looking to open four massive warehouses to help it deliver bulky items like appliances and furniture.  The initiative is part of a strategy to expand furniture offerings and speed up delivery times.  A top Amazon executive said, “Furniture is one of the fastest-growing retail categories.”  While Costco has been doing this for some time, this move by Amazon is sending a shiver through the furniture and home furnishing sectors.

And we can’t end the week without some news out of the airline sector.  It seems airlines around the world are bracing for a possible expansion of an electronics travel ban to include many routes from Europe to the United States.  Representatives from Delta, United, and American met with national security officials in Washington to discuss threats to aviation security and the possible pre-emptive measures.

In closing, the story of the week has to do with distressed clothing.  Remember the trend in the 80’s when new jeans came looking pre-worn.  Stone washed jeans quickly morphed into jeans with holes in strategic places to make them look more fashionable.  Well, this trend reached new heights a month ago as Nordstrom started selling jeans caked in fake dirt for $425 a pair.  And just last week Neiman Marcus started selling battered and ripped sneakers for $1,425 a pair.  Don’t believe me? Check out the links.  I’m at a loss for words.  Now you know.

May 12, 2017

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