Here’s the news of the week – and how we see it here at McAlvany Wealth Management:
Trump Doesn’t Quit, but Stocks Really Should
Equities both here and abroad crept a bit higher this week, with most of the major indices adding about a half a percent. The reason is difficult to see, but the action seems to be feeding on itself whether the news is good or bad. In any case, on the bullish side of things, we had some government action: Trump began to hack away at Obamacare via executive order, the BoJ and ECB reiterated their commitment to asset purchases, and the FOMC minutes revealed Yellen as the only hawkish (by today’s standards) member left on the board. On the market side, we had some early third-quarter corporate earnings reports, which so far have been met with share price declines despite expectation-beating results.
Shares of the big four banks (JPMorgan, Wells Fargo, Bank of America, and Citigroup) in particular were discounted, even as revenues and earnings grew on a year-over-year basis (aided by share buybacks). Commercial lending growth apparently was strong enough to offset weakness in trading and/or consumer lending divisions. Shares of PNC bank suffered through a similar scenario. Elsewhere, AT&T warned that it would fall short of expectations this quarter, given some disappointing subscriber growth (which also hints at trouble with smartphone sales – think Apple). AT&T shares fell over 6% on Thursday. Again, however, markets appeared to shrug these issues off (for now), deeming them to be either company specific or hurricane related.
Away from stocks, a weaker than expected “core” US CPI of 0.1% in September, combined with renewed central bank commitments to QE, kept sovereign debt markets in the black for the week. No records were set, but the 30-year Treasury shed 9 basis points to yield 2.81%, which essentially erased the last two weeks of losses. All of that pushed the dollar fractionally lower, which helped oil and the metals finish the week with solid gains. Oil’s advance may turn out to be a disappointment given that it’s still off 4.36% for the year and the industry has yet to show any real signs of restructuring. Gold, on the other hand, should finish in the green for any number of reasons previously discussed here. It’s up about 13.2% to silver’s 9.5% year-to-date, and will most likely be rangebound between 1,285 and 1,350 from now to year-end, barring some extraordinary event.
VP Investment Management