Week in Review

Good morning everyone. In case you missed it, here is what's happening in the markets. The S&P 500 crossed the 3,000 mark this week. The index is up over 20% year to date, and up 8.5% over the past 12 months.

Interest in Interest Rates. Fed Chairman Jerome Powell spent last Wednesday and Thursday testifying before the Senate. At this hearing, Powell signaled an interest rate cut is likely later this month. Or, to be more precise, Powell said nothing to discourage this expectation. And this in and of itself has investors happy.

Why is this significant? Interest rate cuts are one way the Federal Reserve can help a weakening economy. While the U.S. economy isn't weak. It isn't exactly strong either. Record-low unemployment numbers have still not created significant increases in wages or inflation. The economy is in limbo. So, are rate cuts the answer? If you believe the main factors harming world growth are tariffs and the threat of a re-escalation in our trade dispute with China, the answer is "not likely". Lower interest rates would not lower the cost of tariffs. And a 0.25% cut is unlikely to help rate-sensitive sectors of the economy either (e.g. housing). In other words, people probably aren't going to rush out to buy a home because mortgage rates went down ~0.25%.

Where does this leave the market? Tax stimulus supported business last year, with many companies reporting record growth. But in the absence of additional tax stimulus, this year is a different story with many companies lowering or missing their revenue projections. However, the market is still doing extremely well. The S&P 500 is up over 20% year to date. One reason the market is doing so well is interest rates are still very much below normal levels. Unable to earn money in bonds or cash, investors have turned to stocks. And this has caused the price of stocks to continue rising. The question now becomes, at what point do these price increases become unsustainable?

So what's an investor to do? Ray Dalio, the founder of Bridgewater Associates, offered his thoughts this week. According to Mr. Dalio, every 10 years or so the economy goes through a "paradigm shift." Each new paradigm lasts until the majority of investors adapt. And this causes another shift to happen. As this current paradigm has lasted over 10 years (since 2008), Ray offered the following thoughts.

In a nutshell: Investors will soon experience diminishing returns as equity markets become overbought and it becomes harder and harder to justify high stock prices. He believes the next shift will be towards assets that excel when money is depreciating and domestic and international conflicts increase. The asset he’s referring to is gold.

His reasoning for this claim is the "easy money" the market has received since the financial crisis has created a system flush with cash. Case in point: Boeing. From 2009-2017 Boeing spent close to $30 billion buying back shares of its own stock. Meanwhile, it's underfunded pension received only $10 billion in contributions. Add significant government liabilities (Medicare and Social Security) on top of this and eventually, Dalio believes, central banks will run out of stimulant.

Speaking of Earning Misses…Shares of Netflix fell this week after the company reported fewer paid subscribers globally than projected. Far fewer. Netflix projected that its subscriber base would increase by 5 million last quarter. The actual total came in at 2.7 million. Netflix has blamed this miss on price increases and the platforms original content. This in and of itself is surprising given the $12 billion the company spent on content last year. To make matters worse both The Office and Friends will soon be leaving Netflix's platform, and competition is increasing from Apple, Disney, and AT&T. On the bright side, Netflix kicked off the 3rd quarter with the premier of Stranger Things season 3. The show drew in 26.4 million views in its first four days.

Have a great weekend everyone!

*These are the general views of Stanton Burns and they should not be construed as investment or financial advice for any individual. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Stanton Burns does not maintain positions in any securities mentioned as of the writing of this article. Past performance is historical and does not guarantee future results.

Week in Review

Good afternoon everyone. In case you missed it, here's what happened in the markets this week. It was a short trading week with the markets closing early on Wednesday and closed all day Thursday for the Fourth of July holiday. But fireworks weren’t the only thing going off with a bang as an explosive jobs report showed the U.S. created 224,000 new jobs in June (well above the expected 170,000).

In a nutshell: Under normal circumstances, this would be cause for celebration. However, when you’re Wall Street, and when you are expecting the Fed to cut interest rates in July, a strong job market is the last thing you want to see. And while the worst-case scenario around China trade and tariffs has been avoided to this point, as investors we must prepare for the fact that it could occur at any time.

Meeting of the minds. World leaders from 19 countries and the European Union met this past weekend at the annual G20 summit in Osaka, Japan. Perhaps the biggest news to come from the weekend was the temporary truce agreed upon by President Trump and Chinese President Xi Jinping. President Trump said he will postpone additional tariffs on China while trade negotiations are underway. And, that he will allow the sale of American technology to Chinese company Huawei.

For his part, President Xi agreed to buy massive amounts of agricultural goods from the United States while also accusing rich countries (such as the United States) of, “destroying the global trade order.”

Thirsty for new markets. Speaking of China…The Asian Pacific division of AB InBev has an IPO set to debut on July 19th on the Hong Kong exchange. The IPO, valued at $63.7 billion, will be the largest so far this year. And possibly the largest food and beverage IPO ever. This decision is a combination of two trends. The first being the move by consumers in North America away from beer to wine, spirits, and non-alcoholic drinks. The second being the prediction that by 2021 China will become the world's largest beer market by sales.

Just don’t do it. Nike, no stranger to footwear controversy (see: Market Wrap-Up 2/17/2019), pulled their special edition Air Max 1 Quick Strike Fourth of July's after former NFL quarterback Colin Kaepernick announced that he, and others, felt the shoe evoked a symbol connected to an era of slavery. This prompted Arizona Governor Dough Ducey to withdrawal financial incentives from a proposed Nike facility in Arizona, Senator Martin Trevor Heinrich of New Mexico to off his state as a replacement, and an entire nation to voice their opinion on this topic through social media. It seems the only thing not affected by this issue is Nike stock, which is still up over 15% year-to-date.

And last but not least. Music label Big Machine, the owner of Taylor Swifts first six albums, was just bought by celebrity talent manager Scooter Braun. Taylor issued a statement saying this was a "worst case scenario" due to the bullying Braun has subjected her to for years. Selfishly, we look forward to seeing how she will turn this latest heartbreak into another chart-topping single. Rolling Stone has more on this here.

Have a great holiday everyone. We’ll see you next week!

*These are the general views of Stanton Burns and they should not be construed as investment or financial advice for any individual. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Stanton Burns does not maintain positions in any securities mentioned as of the writing of this article. Past performance is historical and does not guarantee future results.

Week in Review

Good afternoon everyone. In case you missed it, here’s what happened in the markets this week. Today’s summary will be light compared to what you’re used to. And the Blues Stanley Cup victory is 100% to blame.

Three major themes this week were tensions in the Middle East that disrupted oil markets, China’s push to allow extradition from Hong Kong, and growing concern over “deep fake” videos.

Let’s start with oil. Two oil tankers were attacked yesterday in the Gulf of Oman. Secretary of State Mike Pompeo issued a statement after the fact saying Iran was responsible. This comes on the heels of a similar attack, also attributed to Iran, which happened to two Saudi Arabia tankers last month. As Gulf states supply much of the worlds oil and gas, any disruption in this area can lead to price instability. However, as oil production in the U.S. is at a record high, this could potential cushion any blows to the oil market related to tension in the MIddle East.

Protestors in Hong Kong are preparing for another mass rally this week. This is in direct response to a bill which would allow those accused of crimes in Hong Kong to be extradited to China. As Hong Kong is the worlds gateway to China this has left many worried over what the future holds for China’s ‘One Country, Two Systems’ policy. For more on the potential implications of this CNBC has an article on the topic here.

And last but not least…artificial intelligence has now developed to the point that videos can be created of people saying or doing things that they have never said or done. The problem is that no one can seem to agree on how to handle this. Should it be the FBI? The Department of Homeland Security? The media? For now, Facebook has decided to allow these videos, including ones of CEO Mark Zuckerberg to remain on its platform. To be fair, anyone who’s ever watched Forest Gump should’ve seen this coming.

Weekend reading:

16 Things Everyone Should Stop Doing in Order to be Successful, from Medium

250 Ivy League Courses You Can Take Online Right Now for Free, from Medium

Have a great weekend everyone. We’ll see you next week!

*These are the general views of Stanton Burns and they should not be construed as investment or financial advice for any individual. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Stanton Burns does not maintain positions in any securities mentioned as of the writing of this article. Past performance is historical and does not guarantee future results.

Week in Review

Good afternoon everyone. In case you missed it, here's what happened in the markets this week. To recap, in the last 12 months the stock market has made it through interest rate hikes, government shutdowns, an ongoing trade dispute with China, and now an antitrust investigation into U.S. technology companies. And the S&P 500 is still up over 3%. This is the Jackie Joyner-Kersee of stock markets.

The companies in the cross hairs of this antitrust investigation are Facebook, Apple, Amazon, and Google. While it could take years, if ever, for action to be brought against these companies, this news created a noticeable impact on the Nasdaq this week.

On the surface an increase in regulation and a break up of the four largest tech companies seems like a bad thing, but Barron’s has an article on why this could actually be good for investors. It’s definitely worth a read: Breaking Up Big Tech Could Actually Be Good for Investors. Here’s Why.

There’s something amiss at company’s like Apple, but it might not be what you or the Department of Justice think. This week Apple unveiled it’s newest line of products at its annual developer conference. The company, maker of the iPod, iPhone, and iPad unveiled it’s newest product this week: the $999 monitor stand.

In an effort to increase revenue Apple CEO Tim Cook has taken a page out of the quick service oil change playbook.The way it works is you pay $4,999 for the monitor, and then an additional $999 for the stand. However, as one Twitter user pointed out, you could always display it in your home as a work of art.

Is the world officially moving Beyond Meat? The company’s stock price is up a whopping 300% since it’s IPO debuted earlier this year. Increasing concerns among consumers over health and climate change seem to be the culprits. The trend towards meatless meat falls in line with another trend we are seeing; millennials saving less because they think climate change will have catastrophic effects by the time they reach retirement.

Read: Young People Blame Climate Change for their Small 401(k) Balances

This, in turn, falls in line with another trend we’re seeing; young people becoming increasingly depressed about the future.

Read: Alone and Self-Obsessed: Why are we getting more and more depressed?

The latest and greatest in the world of College. Standford removed home equity value from their financial aid calculation. While most schools do not consider the equity in your home to be an available asset for college, around 400 schools do. Most of these are private schools. And up until recently Stanford was one of them. Now the school joins the ranks of Harvard and MIT in deciding to remove this hurdle from their financial aid application. This is a huge boost to middle class families attempting to send a child to one of these schools.

The College Board, who administers the SAT, has officially added a diversity score to their calculation. While they have made it clear that race does not factor in to this score, certain socioeconomic conditions will. Jeremy Singer, President of the College Board had this to say on the topic, “an SAT score of 1400 in East L.A. is not the same as a 1400 in Greenwich, Connecticut. And so, if we can get environmental factors that the student could have overcome or thrived on, and take into context, that will help them.” The score, already used by 50 colleges, will be expanded to 150 more colleges this year. And, will be available to all colleges by 2020.

Read: New SAT Score: Diversity

Not sure which test is right for you? The Princeton Review has a great breakdown of the differences between the SAT and ACT that can be found here.

Have a great weekend everyone. We’ll see you next week!

*These are the general views of Stanton Burns and they should not be construed as investment advice for any individual. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Stanton Burns does not maintain positions in any securities mentioned as of the writing of this article. Past performance is historical and does not guarantee future results.

Monday Morning Boost

Two great articles came across my desk this morning. But, for very different reasons. The first goes over a list of to-do’s for anyone who has a kid getting ready to graduate high school. It covers many of the same topics we advise client’s on here at Oakview. And is a must read for parent’s with high school students.

See: A Financial Checklist for Your Newly Minted High School Graduate

The second article, as you can probably gather from the title, has an entirely different vibe. I really enjoyed reading this article because it lists in detail some of the most common scare tactics financial advisors use to sell retirees insurance and annuity products. This should be required reading for anyone before attending a retirement seminar. It also highlights the potential conflicts of interest of working with an advisor who receives a commission from selling products to you.

See: You May Never See Your Grandchildren Again

Have a great week everyone! We’ll be back on Friday.