Skip to content

Strategic Insights

Volume 8, Edition 43 | December 16 - December 20, 2019

Mailing List

There are currently 1008 subscribers.

The Rise of Stock Markets

121517_main

A long time ago, in what feels like a galaxy far, far, away, U.S equities suffered heavy losses in the Financial Crisis. Since then, stocks have been on the rise, and this week was no different.

Contributed by Doug Walters , Max Berkovich , Aleksey Marchenko ,

The force was with U.S. stocks this week, with the S&P 500 adding to what has already been a banner year for equity investors. With news flow minimal, the force driving stocks appears more likely to be momentum than a change in economic fundamentals. We caution those who fear that this rally could be setting us up for a big decline. Fear is the path to the dark side of investing… market timing. With the future impossible to see, it is better to stay fully invested at an appropriate risk allocation, than blindly jump in and out of the market in hopes of getting lucky. In my experience, there is no such thing as luck.

Headlines This Week

The Trade Federation

  • A top Chinese consultancy says Beijing can purchase over $40 Billion of US agriculture products, including nearly $19 Billion worth of soybeans.
  • Separately, the U.S. House of Representatives passed a trade agreement between the U.S., Mexico, and Canada, also known as USMCA. U.S. Treasury Secretary Steven Mnuchin says the U.S. economy will add 0.50% to GDP growth thanks to the deal.

Spending Credits

  • Personal income grew by more than expected in November, and October numbers were revised upwards.
  • The 3rd quarter Gross Domestic Product (GDP) grew by 2.1% from a year ago. The current annual GDP growth is near the 10-year average.

Return of the Brexit

  • British lawmakers passed Boris Johnson’s Brexit plan with the U.K. planning to leave the European Union on January 31st.
  • A new Central Bank Governor will steer the ship into Brexit as Andrew Bailey will replace Mark Carney.

Next stop: Galactic Senate

  • U.S. equity markets remained unphased after the House of Representatives impeached President Trump. The House will still need to deliver the articles of impeachment to the Senate, who will serve as the Jury.

The Week Ahead

A quiet business week is ahead as the holiday season swings into full gear.

  • The only major report coming out of the U.S. is the Durable Goods Orders for November.
  • U.S. Markets will close early at 1 pm on December 24th and reopen on the 26th in observance of the Christmas holiday.
  • Hanukkah begins at sunset on the 22nd and ends at sunset on the 30th.
  • If you have not already, you can carve out a few hours this week to take in Disney’s (DIS) final chapter of the original Star Wars series, which is out this week. Director J.J. Abrams has a monumental task to bring the epic story, nearly 50 years in the making, to a satisfactory conclusion. This fan and Disney stockholders are hoping he succeeds!

Stock Highlights from Max

Bargain hunting at Watto’s Shop

With equity markets making new highs, it shouldn’t be too surprising that Technology is the leading sector for the past two weeks. The Industrial sector was the laggard as the Max 737 production suspension by Boeing Corp. (BA) trickled down to aerospace suppliers.

Consumers are not the only ones going shopping for Christmas. Several companies went looking for cheap acquisitions like…

Intel Logo

  • Intel Corp. (INTC), who acquired artificial intelligence chipmaker Habana Labs Inc. for $2 Billion. The Israeli company provides deep learning accelerators for data centers. Intel expects to generate $3.5 Billion in sales from AI, up 20% year-over-year.  Another shopper was…

Merck

  • Merck & Co. (MRK) picked up two additions. The first was Arqule (ARQL) at $20 per share. The company paid double the pre-announcement price for the stock. The deal will cost $2.7 Billion. Merck is adding to its cancer and rare disease offering with this purchase. The second purchase was of Vaki from Pentair PLC (PNR). Terms of the deal were not disclosed. Vaki makes fish farming and wild fish conservation monitoring equipment. Vaki will be added to the Norwegian Scan Acqua AS acquisition Merck made in March. Scan Acqua specializes in aquaculture products.

About Strategic

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

Overview