|By Fisher Investments Editorial Staff, 03/13/2017|
In this podcast, Fisher Investments’ Investment Policy Committee discusses their views on capital markets and the economy in 2017.
|By Fisher Investments Editorial Staff, 12/12/2016|
MarketMinder’s editorial staff sits down with Fisher Investments Capital Markets Analyst Brad Pyles. (Recorded 11/17/2016)
|By Fisher Investments Editorial Staff, 12/12/2016|
MarketMinder’s editorial staff sits down with Fisher Investments Capital Markets Analyst Brad Rotolo. (Recorded 11/3/2016)
From Brexit and Trump to Italy, Brazil and the Philippines, 2016 has been a year of political upheaval and theatrics. And it isn’t over yet. South Korean President Park Geun-hye is embroiled in an influence peddling scandal that has outraged the country and likely numbered her days in office. She has offered to step down from office in April 2017—10 months before her term is slated to end—but lawmakers in the National Assembly instead introduced an impeachment bill, which gets a vote Friday December 9. While Park’s political fall looks inevitable, Korea’s political issues needn’t derail its other positive drivers. For global investors, whether or not you own any Emerging Markets stocks, this is another lesson in the importance of thinking long-term and not getting hung up on short-term events.
The movement against Park appears more about her actions (which you can read all about here), not a broader distaste with the government or the state of society. After decades of chaebol (Korea’s huge, family-run mega conglomerates/corporate fiefdoms) dominating political decisions and the economy, corruption has emerged as the societal cause du jour (see this summer’s draconian corruption bill), and Park appears a victim of the times. The scandal also coincides with some economic softness, as a slowdown in global trade hit export-oriented businesses hard. In response, the country’s largest sectors—which account for a fifth of GDP and employ nearly 15% of the workforce—have undergone significant corporate restructuring. More recently, scandals at several chaebol only further weighed on sentiment.
South Korea has also faced some geopolitical uncertainty in recent months. Besides long-running issues with North Korea, which has made progress in its nuclear program, new tensions with China have arisen as South Korea recently deployed an advanced US missile system. In addition, Donald Trump’s victory made many call into question the future of Asia’s trade relationship with the US given his campaign rhetoric and dismissal of the Trans-Pacific Partnership. There is also a potential domestic political headwind, as the legislature’s opposition party favors tax hikes, with eight different proposals put in the supplementary budget bills. With one of the world’s stronger fiscal positions (40% debt to GDP), such a move makes little economic sense, but the negative fallout is likely short term.
There’s more where that came from. Photo by yodiyim/Getty Images.
At long last, the Organization of the Petroleum Exporting Countries (OPEC) reached an agreement to cut production on Wednesday. While details are scarce, comments from oil ministers indicate the group will cut oil production to 32.5 million barrels per day (Mbpd), from recent levels of 33.5 Mbpd. Despite the hype, however, the change is basically window-dressing. It probably won’t much alter global supply or improve the outlook for Energy firms. Their earnings are tied to oil prices, which likely remain lackluster for the foreseeable future (albeit with short-term volatility).
This is OPEC’s first official action of this sort since oil began crashing in 2014. OPEC surprised markets that November by declining to cut production, as had been widely expected at the time. Oil supplies were growing briskly, primarily due to new output from US shale production, which got a boost from developments like horizontal drilling and hydraulic fracturing. The resulting oversupply led to the last two years of oil weakness. With Wednesday’s agreement to cut production, OPEC is arguably moving back to its traditional role of attempting to target a price range for oil.
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|By Tim Wallace, The Telegraph, 03/24/2017|
MarketMinder's View: IHS Markit’s March flash composite purchasing managers’ index for the eurozone soared to its highest level in six years, signaling a broadening and strengthening expansion. Yippee! As the political fog clears, investors will see strong economic fundamentals more clearly, and falling uncertainty should lift eurozone stocks. While sentiment toward the region is clearly warming up, it still has plenty of room to thaw, as evidenced by the inflation fears and worries about premature monetary tightening at the end of the article. So you haven’t missed the boat.
|By Kathy Frankovic, YouGov, 03/24/2017|
MarketMinder's View: About one-third of Americans don’t much trust government statistics, and even fewer trust unemployment numbers—regardless of political party, a plurality of Americans think the Labor Department understates unemployment. And on the one hand, they sort of do! The headline unemployment rate, the U-3, counts only those who are unemployed and looking for work. The U-6 unemployment, which also counts those employed part-time for economic reasons or marginally attached to the labor force, is several points higher. There are several other unemployment rates, too, which we discussed last year. U-3 gets all the attention, but the government’s statheads report a smorgasbord of data, which you can download, slice and dice all you want. It’s pretty cool. Then again, stats are only as good as their inputs, and jobs data come from surveys of households and businesses, which aren’t airtight. That’s all a long-winded way of saying we get why folks are skeptical, and we’re always skeptical of any single datapoint, regardless of the source. But it is worth noting that several private-sector outfits report labor market statistics, including payroll processer ADP, and their data show the same broad trends as the official data.
|By Sho Chandra, Bloomberg, 03/24/2017|
MarketMinder's View: “Orders for U.S. durable goods increased more than forecast in February, a sign companies are confident about the outlook for the economy. Bookings for goods meant to last at least three years rose 1.7 percent after a 2.3 percent advance the prior month that was larger than previously estimated, Commerce Department data showed Friday. The median forecast of economists surveyed by Bloomberg called for a 1.4 percent increase. A sixth straight gain in orders for durable goods minus transportation equipment underscores rising demand that will help to broaden economic growth.”
|By Anjani Trivedi, The Wall Street Journal, 03/24/2017|
MarketMinder's View: We’re automatically skeptical of all “it’s different this time” arguments, but far be it from us to just dismiss anything out of hand, so we dove into this one, hoping (for its own sake) that it at least presented new evidence to show why stress in China’s short-term money markets would be the straw that breaks the camel’s back this time, when it hasn’t done so in years past. Alas, these are all the same arguments we saw four years ago, the last time people really worried about this. The only real change, near as we can tell, is that now some Wealth Management Products (short-term bank funding vehicles that guarantee principal and pay high interest rates) have invested in other Wealth Management Products. Which is interesting, but we fail to see how it creates a negative feedback loop on par with 2008’s financial crisis. The financial system didn’t come to a screeching halt then because, say, Lehman Brothers invested in Bear Stearns. It happened because a misapplied, esoteric accounting rule forced hedge funds and banks to firesell assets and revalue similar securities on their balance sheets at comparable firesale prices. For all the talk of financial derivatives “ballooning out of control” back then, that all turned out to be a tempest in a teapot, as most of those derivatives cancelled each other out. We aren’t saying China’s financial system is in perfect shape, and goodness knows there is some weirdness and shenaniganery, but 2008 this is not. Particularly when the Chinese government underwrites the entire financial system and still has about $3 trillion of firepower to deploy if needed.
Market Wrap-Up, Thursday, March 23, 2017
Below is a market summary as of market close Thursday, March 23, 2017:
- Global Equities: MSCI World (+0.1%)
- US Equities: S&P 500 (-0.1%)
- UK Equities: MSCI UK (+0.6%)
- Best Country: Ireland (+1.1%)
- Worst Country: New Zealand (-0.4%)
- Best Sector: Materials (+0.3%)
- Worst Sector: Information Technology (-0.3%)
Bond Yields: 10-year US Treasury yields rose 0.01 percentage point to 2.42%.
Editors' Note: Tracking Stock and Bond Indexes
Source: FactSet. Unless otherwise specified, all country returns are based on the MSCI index in US dollars for the country or region and include net dividends. S&P 500 returns are presented including gross dividends. Sector returns are the MSCI World constituent sectors in USD including net dividends.