Happy Memorial Day!

May 24, 2019   //   by Bruce Mason   //   Weekly Market Update  //  No Comments

It’s been a slow melt over the past four weeks with the market ending each week a little lower.  May has not been a favorable month for investors.  This week was no different than the last few, the driving force being a lack of progress on trade with China.  In addition, there is Theresa May’s resignation as British Prime Minister, an on-again, off-again Twitter war with Iran, and a widening dislike between the President and Democratic leadership on Capitol Hill.  To be fair, the markets are holding up well given the circumstances.

Putting the aforementioned aside, there is a lot to report on corporate news.  Despite booming pickup truck sales, Ford announced it will be restructuring (again) with the goal of saving $600 million annually.  The company reported it plans to cut 7,000 salaried jobs by August or roughly 10% of its global salaried workforce.  Ironically, Fiat Chrysler released plans to build a $1.6 billion assembly plant and invest $900 million to modernize a second plant in Detroit.  I’m not sure these two announcements cancel each other out, but it is a welcome sight to have production come back to Detroit.

The technology sector had a difficult week after President Trump put a ban on Huawei, the largest telecommunications-equipment company in the world and second largest smartphone manufacturer ahead of Apple.  Oh, and it is in China.  Technically, it is a trade blacklist that bans companies from selling components that Huawei uses to assemble its own finished products.  Those companies affected include Qualcomm, Xilinix, Broadcom, Corning, Micron, and STMicroelectronics.  So why did the President put a ban on Huawei?  That’s not as clear.  The official line is that, “Huawei’s hardware puts the U.S. at risk for espionage.”  However, there is almost certainly more to this story than we’re being told.

Boeing’s woes have temporarily subsided with the software update on its 737 MAX completed, or more specifically its MCAS system.  The FAA announced it expects the grounding to be lifted as soon as late June.  However, I say “temporarily” because China’s top three airlines have called for compensation from Boeing for losses incurred by the grounding and delayed deliveries of 737 MAX planes.  I suspect these airlines won’t be the only ones demanding compensation and your guess is as good as mine how much they will be able to extract from Boeing.  Perhaps bad timing, but Boeing’s next commercial jet design, dubbed the 797, is expected to have a cockpit that seats only one pilot, with a second ground-based pilot “monitoring several aircraft.”  I can’t imagine this is a good time to be proposing such a radical change.

In other news, Facebook reported it removed nearly 3.4 billion fake accounts from October, 2018 to March, 2019.  By its explanation, this is twice the number of fraudulent accounts deleted in the previous six-month period.  As a result, the company estimates that 5% of its 2.4 billion monthly active users are fake accounts.  This is a staggering number of fake accounts and really calls into question whether the novelty of Facebook has worn off in the face of bad actors with malevolent intent.  Could the era of social media be coming to a natural end?

In closing, let’s talk about genetically modified food (GMO) which has been around for some decades.  The goal of scientists has been to make our food more resistant to pests, help them grow faster, and make them drought resistant.  Among the many success stories are corn, soybeans, sugar beets, alfalfa, canola, and squash.  Up until now genetic modification was solely done in the realm of plant based food.  This week, AquaBounty Technologies announced the FDA has approved its request to produce genetically modified salmon in the U.S.  The genetic modification causes the salmon to grow twice as fast as those in the wild.  The company touts sustainability while its opponents call the product a “frankenfish.”  The company plans to initiate operations at its fish farm in Indiana.  Now you know.

May 24, 2019

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