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Strategic Insights

Volume 8, Edition 8 | February 18 - February 22, 2019

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Slow and Steady

Max Berkovich | Articles

Read Time: 2:00 min | Video: 1:04

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Stocks started the week with a slow and steady climb, gave most of gains back Thursday, and charged higher on Friday. The market continued to see positive signs from Chinese trade negotiations which are tackling long-term structural issues.

Headlines this Week

Contributed by Max Berkovich

 

  • International stocks outperformed U.S. peers while U.S. small-capitalization stocks continued their strong march higher and outperformed mid and large capitalization stocks for the week.
  • The U.S. Federal Reserve indicated that they are poised to halt their balance sheet reductions and possibly hold interest rates steady.
  • U.S and China trade negotiations are going well, reportedly. They have agreed upon 6 memorandums of understanding. The memorandums deal with six structural issues; forced technology transfer and cyber theft, intellectual property rights, currency, agriculture, non-tariff barriers to trade and services.
  • The European Union (EU) threatened to retaliate by imposing targeted tariffs on Caterpillar (CAT) and Xerox (XRX) if the U.S. follows through with its threat to impose duties against the European automotive industry.
  • In the latest Brexit twist, the European Union (EU) expects the United Kingdom to ask for a 3-month delay. However, EU Parliamentary election loom in May, there may be less willingness to let the process drag on any later.

The Week Ahead

  • Strategic holdings Booking Holding Inc. (BKNG) & retailer TJX Companies Inc. (TJX) are due to release earnings.
  • Tuesday & Wednesday sees Federal Reserve Chairman Powell testifying in Congress.
  • British Prime Minister May is scheduled to hold a Brexit speech as the clock ticks down to the March 29th deadline.
  • 4th Quarter 2018 preliminary Gross Domestic Product (GDP) index will be released on Thursday.

Stock Highlights from Max

Academy Awards

Academy Awards: Best Sector award goes to materials thanks to a moving performance from best actor winner. The worst sector was a unanimous pick, health care thanks to a forgettable adaptation of an old script by…

  • CVS Health Corp. (CVS) stuck to a familiar script with a beat on earnings but a miss on revenue and a big cut to guidance. The Academy took note that many are dismissing this report as transitory as the company just completed a transformative acquisition of a health insurer. Hopefully, the bad reviews are in the past and the company is positioned well to capitalize on a 5.5% annual increase in spending on health care that the Center for Medicare & Medicaid is predicting for the next decade.
  • Best supporting actor despite being in the worst sector was Merck & Co. (MRK). The pharmaceutical giant announced it was acquiring Immune Design (IMDZ) for $300 Million. IMDZ’s anti-tumor response seems to be the prize, as it showed good results in conjunction with Merck’s Keytruda cancer antibody.
  • Best actor this week goes to Albemarle Corp. (ALB) which delivered a moving quarter as it beat consensus expectations. The mining and specialty chemicals company reported that lithium pricing was up 9% in 2018 and volume had increased as well. The company also guided for double-digit earnings per share growth in 2019.

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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