Form Over Function

Feb 16, 2018   //   by Bruce Mason   //   Weekly Market Update  //  No Comments

After the past couple of weeks, this one felt pretty good.  Major stock indices are headed for the best week in six years as the rebound in global equities pushes into the sixth day.  We’re encouraged that the fear that encased the markets has melted somewhat with a recognition that this isn’t the same market it was in 2017.  For sure, these are different times with different challenges, but as long as investors aren’t taken by surprise with irregular economic indicators or unexpected Fed policy changes we might expect to regain some momentum in the markets.

Along those lines, the President unveiled an infrastructure plan, on whose face, should provide further stimulus to an already hot economy.  However, the plan falls far short of what many expected, including only $200 billion in federal funding with the bulk of the money coming from private investors.  This puts more emphasis on finding projects that are attractive to private investors for their potential returns, which might not be the public projects that are necessary but don’t include the prospects of a large return.  To come up with the $200 billion, President Trump has endorsed the idea of an additional gasoline tax of $0.25 per gallon which, in and of itself presents a rather large uphill battle.  Given the reaction of the market, investors don’t seem all that bothered by the prospects of this proposal perhaps because they don’t think it will pass in its current form.

In other news, we had a slew of economic data released this week, and despite inflation being front and center, it didn’t seem to bother the market like it did just two weeks back when wage and labor pressure took center stage.  The Consumer Price Index (CPI) came in higher than projected with headline inflation rising an eye-popping 0.50% for the month!  But like most other news this week, the markets seemed to shrug off what would otherwise be concerning developments.  Fortunately, February Consumer Sentiment came in well above expectations suggesting people may be experiencing some of the benefits of the recent tax reform, in terms of higher after-tax take-home pay and perhaps even employer bonuses.

In company news, we learned Facebook may be falling out of favor with the youth.  While we’ve known for some time that alternatives like Snapchat and Instagram have grown at the expense of Facebook, it revealed that it may be losing younger users more quickly than previously estimated.  The company expects the first-ever decline in the age 18-24 user base in the U.S. this year of 5.8%.  While Facebook is still growing in the U.S., it is mainly due to older users signing on.  McDonald’s has finally decided there’s more to fast food than hamburgers.  The company is making chicken a top priority with companies like Chick-fil-A clearly in its sights.  Also, a sign of the times, the New York Times reported this week that it expects print to be dead within the next ten years.  Call me “old-fashioned” but for those of us who grew up with traditional newspapers, there’s just something special about the feel, experience, and touch of a paper that doesn’t want to fold in quite the way you want.  And what about the black ink on our fingers?  While we must adapt, we don’t have to like it.

In closing, I’d like to report on a story I came across this week that, while funny, asks the age-old question regarding form over function.  You almost certainly have heard that Apple built a new headquarters in the shape of a large circle.  Some, including Steve Jobs himself, liken it to a giant spaceship.  It seems the interior of the building was designed to be open and airy with 45-foot panels of curved glass a testament to innovation.  There’s only one problem.  Apple employees keep smacking into the glass.  Apple employees are often glued to their iPhones which has resulted in repeated cases of distracted employees walking into the panes.  Some staff started to stick Post-It notes on the glass doors to mark their presence, but they were removed because they detracted from the building’s design.  It’s quite a conundrum.  Put the iPhones down or don’t have glass walls?  We may never know how this plays out, but I’d guess the eternal question of form over function will be a hotly debated topic at Apple headquarters for many years to come.  Now you know.

February 16, 2018

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