Markets “In a Nutshell” for May 28, 2019

Investment Week at a Glance

Stocks finished mostly down for the week. The Dow Jones Industrial Average was down 0.69%, the S&P 500 fell 1.17 %, the New York Stock Exchange Composite (2,000 stocks) fell 0.60% and the average investors index (Value Line Index) was down 2.00%. Foreign stocks (DJ Global ex U.S.) were up 0.19%. Bond prices were up for the week, pushing the yield on the 10-year U.S. Treasury down 7 basis points to finish the week at 2.33%. (Data sources: Wall Street Journal)

Europe Stocks Rise after Elections

European stocks rose broadly as pro-European Union parties had a better than expected showing in the continent wide parliamentary elections. With these elections providing decision powers on all European decisions, it was important for pro-EU parties to be able to form a majority voting bloc and fend off EU-skeptic parties that sought to limit the power of the institution they were seeking to get elected to. Even though economic growth continues to be tepid and monetary policy is frozen at negative interest rates, less political uncertainty regarding the EU should provide some momentum to European stocks and add diversification to US stocks as US-China trade tensions rise with no end in sight. (Wall Street Journal)

Active Management could shine as Volatility Rises

With volatility spiking since the recent Federal Reserve meeting and rise in US imposed tariffs on China happened in the same week, more investors are looking towards active managers, who look to pick specific stocks. As it becomes easier to find companies that will be less effected by tariffs than others, passive funds that hold everything within an index, such as the S&P 500, will more than likely underperform in this environment because they are forced to hold stocks that will suffer as result of the increase in tariffs. This provides an opportunity for active managers to make up for a decade of being beaten by passive funds and show that sometimes higher costs are worth it if they lead to higher returns. (Wall Street Journal)

U.S. Targets Huawei

The U.S. blacklisted Chinese telecom and smartphone manufacturer Huawei last week, further deepening the ongoing trade war with China and showing that the end is far from near. Huawei being blocked from the U.S. is a major step in the trade war not just because they can no longer sell equipment to U.S. corporations, but because they can’t buy the necessary hardware and software from American companies to be able to survive. The timing of this ban is critical as telecom companies around the world getting ready to rollout 5G data networks that will not only increase download speeds by 10 times over 4G, but provide for the advancement of future technologies that China and the U.S. are desperate to be first to develop. (Barron’s)

Quiz:

Through Friday’s close, what is the best performing stock in the S&P 500 index?

a. Anadarko Petroleum

b. Amazon

c. Chipotle Mexican Grill

d. Coty

Answer is below…

 

Have a good week!

 

Answer to quiz:

d. Coty, a beauty and cosmetics maker, is up 88.6% this year largely as a result of a large investment by German conglomerate Jab Holding Co..