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Strategic Insights

Volume 8, Edition 18 | May 20 - May 24, 2019

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No More May in June

Doug_Walters Doug Walters | Articles

Read Time: 4:30 min

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With stocks down and the weather misbehaving, we are ready to be done with May. Apparently, so is Britain…

Contributed by Doug Walters , Max Berkovich , Aleksey Marchenko

The month of May has been forgettable for stocks (the S&P 500 was down 4.5% on the month at its low) and for weather in the Northeast (above average rain, and below average temperatures). Let’s hope that there is no more of May in June. In Britain that looks assured, as Prime Minister Theresa May has announced her intention to step down next month after failing to reach a Brexit deal.

Headlines This Week

  • The Brexit deadline has been postponed to October 31st after the UK’s Prime Minister Theresa May announced her plans to resign on June 7th. May’s decision to leave comes after a fourth failed attempt to get lawmakers on board with a Brexit deal. It will take a few weeks for the party to decide on a new Prime Minister.
  • India’s stock market hit an all-time high after Prime Minister Narendra Modi won another five-year term in a landslide. The big win by his Bharatiya Janata party will empower Modi to push through with reforms to combat unemployment and rural distress. The election results give Modi a majority in the upper house of India’s parliament, which was viewed as an obstacle in his agenda in his first term.
  • The price of oil was under pressure, suffering its worst week of 2019 due to worries surrounding a slowdown in global economic growth. Oil inventories in the U.S. have been climbing since September 2018, making commodity traders worry that a slowdown in oil demand could create another glut of oil supply.
  • Lastly, Federal Reserve Chairman Powell was the keynote speaker at the Atlanta Fed’s Financial Markets Conference, where he declared that he did not see a “strong case” for either a cut or hike in interest rates.
May 27th, 2019
Monday is Memorial Day, providing an opportunity to honor those who have fallen in the service of our nation. The day of remembrance has its roots in Central New York (Waterloo to be precise), where those who died in the Civil War were celebrated. Strategic tips its hat to these brave souls and their families. My kids and I will pay tribute musically, participating in the marching band at our local parade. Come cheer us on as I bang on the quads.

The Week Ahead

With markets closed for Memorial Day on Monday, the consumer will be in focus in the shortened week.

  • Economic highlights include the Q1 GDP release, Personal Consumption Expenditure (PCE) Index release, personal income, personal spending, University of Michigan Consumer Sentiment Index, and The Conference Board’s Consumer confidence survey results.
  • Our Stock focus will be on the consumer with retailers William-Sonoma (WSM), DollarTree (DLTR), Costco (COST), and Ulta Beauty (ULTA) all scheduled to report earnings on Thursday.

Stock Highlights from Max

QualcommTJX

Court Report

Health Care was the top sector as it continues to bounce back from an awful April. Energy, as previously mentioned, had a rough week thanks to declining crude prices, but it was the Technology sector that finished the week in last place entirely due to…

  • Qualcomm Inc. (QCOM) felt the sting of the law this week as the company lost a crucial anti-trust ruling. The ruling from the 9th Circuit Court (Northern California) sided with the Federal Trade Commission, challenging QCOM’s business model. The verdict claims the “licensing practice” strangled competition. In particular, its crucial role in 5G leads the Judge, Lucy Koh to conclude that QCOM would continue to stifle competition without intervention.
  • It is interesting that this case from 2007 resolved after QCOM made a deal with Apple, which propelled the stock higher by 50%. The ruling allows companies who work with Qualcomm to demand a renegotiation of terms and prohibits QCOM from having exclusivity deals with phone makers. As a result, roughly $5 Billion of revenue is up for plucking. Also, QCOM must submit to seven years of oversight to ensure it complies with the ruling. Qualcomm immediately began the appeal process.
  • In other news, TJX Companies (TJX) reported a consensus topping quarter and lifted its full-year 2020 guidance. The company had sales growth of 5% in the quarter. Another earnings report of note came from medical device maker Medtronic PLC (MDT), which also beat expectations. The company expects full-year organic revenue growth to come in a 4%, with earnings in the $5.44-$5.50 range.

About Strategic

Founded in 1979, Strategic is a leading investment and wealth management firm managing and advising on client assets over $1.3 billion.

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