Trumped Up
Michael Leist
The DJIA extended its losing streak to 7 days, the longest period since 2011. The losses have been relatively well-contained, but the trend is a concern.
Market Review
Contributed by Alan Leist, III
The DJIA extended its losing streak to 7 days, the longest period since 2011. The losses have been relatively well-contained, but the trend is a concern.
Demand Side Economics: The continued sell-off in oil and the rally in the bond market are signals that weak economic activity and deflation remain concerns.
- With stock valuations stretched, there is no margin of safety to cushion a slowdown in earnings growth.
- Can/will the Fed raise rates in this environment? Yes
Beat it: Over 70% of companies have beaten earnings estimates this season (Factset). Not too bad, but…
*The beats are on sharply lower estimates and we may see that earnings actually declined year over year.
Political Theatre: The Iran and GOP debates were headline grabbers, but ultimately market snoozers.
- As the Presidential campaign heats-up, a fun fact to remember: Democrats lead Republicans in stock market performance by a wide margin over the decades.
- Obama’s return: +150%.
Stock market performance during Obama administration
Investment Strategy Update
STRATEGIC Asset Allocation
See Saw: With a 5-year fulcrum, the Treasury curve continues to get flatter. Investors are heading to the long-end of the curve in anticipation of a Fed rate hike. This type of movement is not typically viewed as a ringing endorsement of the economy’s direction.
Slide: Stock markets are less than thrilled with impending rate hikes with August off to a weak start.
Merry-go-round: Chinese stock markets continue to post dizzying daily gyrations.
Swings: Sentiment in the commodity markets continues to be sour. In oil markets, supply show no signs of easing.
STRATEGIC Growth
A Mouse in the House: Several earnings release impacted the strategy this week including these three industry leaders…
- The Good: Priceline Group Inc. (PCLN) topped consensus and reported a 12% jump in international bookings.
- The Bad: EOG Resources (EOG) technically beat expectations, but reported earnings that were down 99% year over year.
- The Ugly: Walt Disney Co. (DIS) showed the impact of “cord-cutters” particularly in the ESPN franchise.
STRATEGIC Equity Income
The Road to BaxShire: A relatively good week for the strategy as market’s rotation to dividend paying stocks was evident.
- Recent spin-off from Baxter Intl. (BAX), Baxalta (BXLT), received an unsolicited merger offer from Shire (SHPG) valued at $30B, a 36% premium to Monday’s close. Baxalta quickly rejected the advance because it “significantly undervalues the co. and its attractive prospects for growth.”
About Strategic
Founded in 1979, Strategic is a leading investment and wealth management firm managing and advising on client assets of over $2 billion.
OverviewDisclosures
Strategic Financial Services, Inc. is a SEC-registered investment advisor. The term “registered” does not imply a certain level of skill or training. “Registered” means the company has filed the necessary documentation to maintain registration as an investment advisor with the Securities and Exchange Commission.
The information contained on this site is for informational purposes and should not be considered investment advice or a recommendation of any particular security, strategy or investment product. Every client situation is different. Strategic manages customized portfolios that seek to properly reflect the particular risk and return objectives of each individual client. The discussion of any investments is for illustrative purposes only and there is no assurance that the adviser will make any investments with the same or similar characteristics as any investments presented. The investments identified and described do not represent all of the investments purchased or sold for client accounts. Any representative investments discussed were selected based on a number of factors including recent company news or earnings release. The reader should not assume that an investment identified was or will be profitable. All investments contain risk and may lose value. There is no assurance that any investments identified will remain in client accounts at the time you receive this document.
Some of the material presented is based upon forward-looking statements, information and opinions, including descriptions of anticipated market changes and expectations of future activity. Strategic Financial Services believes that such statements, information, and opinions are based upon reasonable estimates and assumptions. However, forward-looking statements, information and opinions are inherently uncertain and actual events or results may differ materially from those reflected in the forward-looking statements. Therefore, undue reliance should not be placed on such forward-looking statements, information and opinions.
No content on this website is intended to provide tax or legal advice. You are advised to seek advice on these matters from separately retained professionals.
All index returns, unless otherwise noted, are presented as price returns and have been obtained from Bloomberg. Indices are unmanaged and cannot be purchased directly by investors.