|By Fisher Investments Editorial Staff, 02/15/2017|
In this podcast, we interview Content Analyst Elisabeth Dellinger on recent talk of protectionism, border taxes and trade.
|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.
In a year where populism has swept the ballot box, is Italy next? On December 4, the country will hold a referendum on whether to reform the size, powers and appointment process for Parliament’s upper house, the Senate. If the referendum is approved, the Senate’s powers would be greatly curtailed and size reduced. It would shrink from 315 members to 100, the government would no longer have to win a Senate confidence vote, fewer measures would require Senate approval and senators would be appointed by Italy’s Regional Councils instead of directly elected. If passed, it would foster government stability and make it easier to pass badly needed reforms. But if it fails, many fear it will destabilize Italy’s pro-euro government, potentially propelling anti-euro populists to power and raising the risk of a domino effect across the eurozone. In our view, however, fears of broader market impact are likely overstated.
Prime Minister Matteo Renzi proposed the referendum to mitigate the Senate’s ability to block legislation and increase the Italian government’s stability, through elimination of one confidence vote. However, he also indicated his government will step down if the referendum is defeated. Opposition parties, such as the Five Star Movement (M5S), are against the referendum, as they believe it gives too much control to the Prime Minister. Many believe a Renzi resignation could give M5S an opening to enter the national government.
Italy doesn’t allow the publication of polls 15 days prior to an election or referendum, but the last polls indicated the “No” vote was ahead by about three points. PredictIt, a betting website similar to the late, great InTrade, puts the odds of the “No” vote prevailing at ~80%. But as US elections and the Brexit vote showed, polling and prediction have been unreliable lately. The considerable number of undecided voters (~20%) also suggests any poll isn’t conclusive.
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|By Paul R. LaMonica, CNN Money, 02/23/2017|
MarketMinder's View: No, this isn’t 2009. And it isn’t 2012, when “too far, too fast” talk ran amok as markets first attained pre-recession highs. That talk was wrong then and this article likely is too, as it cites a litany of widely known perceived and presumed “negatives” like Trump’s unpredictability, slow growth and European politics. Those fears are all part of the sentiment backdrop that has clouded investors’ appreciation of a nearly eight-year old bull and seven-and-a-half year-old economic expansion. But maybe, just maybe, the rally we’ve seen is justified by the fact we saw Brexit, oil, the US election and more defy pundits’ dire predictions in one nine-month span—and folks got more confident. This bull market has proven “wise” folks who doubted it wrong for years. Doesn’t seem different this time, either.
|By Helene Fouquet and Gregory Viscusi, Bloomberg, 02/23/2017|
MarketMinder's View: Emmanuel Macron, the independent centrist among the top three candidates for the French presidency, won the support of rival centrist Francois Bayrou on Thursday. This should give him greater support in the first round of voting, slated for April, in which many candidates will vie to finish in the top two and enter the decisive, head-to-head second round. Macron is already one of three frontrunners for the two spots, and Bayrou’s support could help. This adds a wee bit of clarity to the race to challenge the poll-leading euroskeptic Front National’s Marine Le Pen in the second round, although it is still early. Macron and Republican François Fillon both trounce Le Pen in head-to-head polls, suggesting the first round is mostly a choice between two mainstream options.
|By Eren Gulfidan, CNBC, 02/23/2017|
MarketMinder's View: So we usually don’t feature these “follow this one weird trick to save money!” type of personal finance article because they are generally all the same: Don’t buy the $6 latte, make your coffee at home, yada. They are the personal finance equivalent of nagging. That said, this makes two valuable points: Make sure you have a register of what you spend money on. And make sure that, if you do splurge, the return is worth the trade-off of saving less or spending the funds elsewhere.
|By Howard Gold, MarketWatch, 02/23/2017|
MarketMinder's View: Did you know black swans (the actual birds) are the norm in Australia? We digress. This article rightly presumes the bull market—driven by rebounding earnings, economic growth and favorable political drivers—will continue, absent some huge negative. This is a correct basic mindset, in the sense that it seems to us only a wallop—a shocking negative wiping out trillions in economic activity—can derail the bull at this time. However, geopolitical concerns are omnipresent. And, most of the areas of concern cited here—Russia, North Korea, Iran—are virtually perennial hot spots, not shocks and certainly not black swans in the “tail risk” sense of the term. They are more the Australian variety. It is worth remembering that geopolitics’ history of impacting markets is much more limited than most folks presume. Basically, conflict must be sweeping and global in order to affect market cycles materially. Use that as your basic standard in weighing conflict when it inevitably breaks out somewhere in the world.
Market Wrap-Up, Wednesday, February 22, 2017
Below is a market summary as of market close Wednesday, February 22, 2017:
- Global Equities: MSCI World (-0.0%)
- US Equities: S&P 500 (-0.1%)
- UK Equities: MSCI UK (+0.3%)
- Best Country: Singapore (+1.4%)
- Worst Country: Austria (-1.2%)
- Best Sector: Consumer Staples (+0.4%)
- Worst Sector: Energy (-1.4%)
Bond Yields: 10-year US Treasury yields fell 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.