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Political events finally affect the market, with the biggest one day drop in more than eight month. Is this a sign that market volatility will actually pick up or just more of the same old same old???

by Fortem Financial May 22, 2017

Markets were volatile last week as political events continued to dominate headlines. On Wednesday, revelations related to President Trump’s dismissal of FBI Director James Comey unnerved investors; the 373-point drop in the Dow Jones Industrial Average was the Index’s largest decline in more than eight months. Markets recovered a portion of Wednesday’s sell-off on Thursday and Friday and markets are up today as economic data provided some reassurance of favorable business conditions. Jobless claims, which dropped to near-record lows, point to tight labor markets and rising wages. The Philadelphia Federal Reserve’s monthly survey of manufacturing conditions signaled continued improvement in factory activity, including strength in new orders and backlogs. Also, earlier in the week, the Industrial Production report for April showed accelerating manufacturing activity; an increase in spending on major equipment purchases underscores growing confidence in the economic outlook. Deere’s earnings report corroborated signs of an improving industrial economy with the company forecasting an 18% rise in equipment sales for its fiscal third quarter (July) compared to the prior year. Rising expectations for global GDP expansion, including Europe, Japan, and China, are also providing support for corporate growth plans even as the embattled White House’s pro-growth agenda may be on hold for the time being.

West Texas Intermediate crude, the North American benchmark, rose above $50 per barrel for the first time this month. Earlier in the week, Saudi Arabia and Russia committed to a 9-month extension of OPEC’s production freeze agreement ahead of its meeting next Thursday in Vienna. Although not a member of OPEC, Russia is the world’s largest crude oil producer; as such, its cooperation is essential to achieving OPEC’s objectives. In addition, the cartel is reportedly considering deeper production cuts in an effort to bring down global crude inventories. At the same time, U.S. shale producers have dramatically increased output by 465,000 barrels per day, or 5.4%, since September. The dueling dynamic has led some analysts to posit that any agreement by OPEC and Russia would merely result in market share gains for North American producers with minimal impact on oil prices. This analysis, though, overlooks the role of oilfield service providers that have had to accept significant discounts for their services over the past two years. As activity levels improve, we anticipate that pricing for these services will rise, and push oil prices higher as a result. The sector, which has lagged the broader market thus far this year, remains poised for gains as the industry recovery unfolds.

Source: Pacific Global Investment Management Company

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

 

Last Week's Headlines

  • The pace of new home construction took a step back in April, according to the Census Bureau. Housing starts, housing completions, and the number of building permits each lagged in volume compared to March. The annualized rate of housing starts in April was 2.6% below the March total. Privately owned housing completions were 8.6% below the revised March estimate. And the number of building permits issued in April for all residential housing units was 2.5% behind March's total. However, compared to a year ago, housing starts (+0.7%), housing completions (+15.1%), and building permits issued (+5.7%) are ahead of their respective totals from April 2016.
  • According to the Federal Reserve, industrial production advanced 1.0% in April for its third consecutive monthly increase and its largest gain since February 2014. Manufacturing output rose 1.0% for the month following a 0.4% decline in March. The indexes for mining and utilities posted gains in April of 1.2% and 0.7%, respectively. However, capacity utilization for the industrial sector increased 0.6 percentage point to 76.7%, a rate that is 3.2 percentage points below its long-run average. Nevertheless, total industrial production in April was 2.2% above its year-earlier level.
  • In the week ended May 13, the advance figure for seasonally adjusted initial claims was 232,000, a decrease of 4,000 from the previous week's unrevised level of 236,000. The advance seasonally adjusted insured unemployment rate remained at 1.4% for the fifth consecutive week. For the week ended May 6, there were 1,898,000 receiving unemployment insurance, a decrease of 22,000 from the previous week's revised level. This is the lowest level for insured unemployment since November 5, 1988, when it was 1,898,000.

 

Eye on the Week Ahead

The first-quarter GDP report based on updated information is released this week. The initial report in April revealed lackluster economic growth for the start of 2017. The latest figures on durable goods orders, which are included in the GDP computation, are also available this week. Both of these reports are good indicators of the relative strength of the economy through the first part of 2017.

 

 

Brian Amidei, along with Partners Joseph Romano and Brett D'Orlando have also been named *2014, 2015, 2016, 2017, 2018 Five Star Wealth Managers!

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Five Star Professional Disclosure:
The Five Star Wealth Manager award is based on 10 eligibility and evaluation criteria: 1) Credentialed as an investment advisory representative (IAR) or a registered investment advisor; 2) Actively employed as a credentialed professional in the financial services industry for a minimum of five years; 3) Favorable regulatory and complaint history review; 4) Fulfilled their firm review based on internal firm standards; 5) Accepting new clients; 6) One-year client retention rate; 7) Five-year client retention rate; 8) Non-institutionalized discretionary and/or non-discretionary client assets administered; 9) Number of client households served; and 10) Educational and professional designations. The inclusion of a wealth manager on the Five Star Wealth Manager list should not be construed as an endorsement of the wealth manager by Five Star Professional or the magazine. The award methodology does not evaluate the quality of services provided. Additional information about this award is available at: fivestarprofessional.com/2016FiveStarWealthManagerMethodology.pdf
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Data Sources: News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market Data: Based on reported data in WSJ Market Data Center (indexes); U.S. Treasury (Treasury Yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness.

Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. The opinions expressed are solely those of the author, and do not represent those of Fortem Financial, LLC or any of its affiliates. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful. Forward looking statements are based on current expectations and assumptions, the economy, and future conditions. As such, forward-looking statements are subject to inherent uncertainty, risks, and changes in circumstance that are difficult to predict. Actual results may differ materially from the anticipated outcomes. Carefully consider investment objectives, risk factors and charges and expenses before investing. Fortem Financial is a registered investment adviser with the SEC. Advisory services are offered through Fortem Financial.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighed index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.

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