Saturday, April 15, 2017

TLH Market Review 4/15/17

I'll be keeping this one short and sweet as I celebrate Easter Weekend.  Today is normally the final day to file your 2016 taxes, unless of course you file for an extension.  However procrastinators fear not as you have until Tuesday April 18th this year to square up with Uncle Sam.

There was a slew of lower tier economic reports this week. One that I've been watching more closely is Consumer Confidence provided by the Conference Board, and Consumer Sentiment which is calculated by the University of Michigan.  It's oft understated how much of our economy is based upon expectations and
peoples actual confidence in their economic well-being.  For one people will not spend or invest if they feel the future is shaky.  They glean these assumptions from the news, talking with others, and what they see with their own eyes.  If people do feel good then you can bet spending will increase, investment will rise, and the ensuing tide of economic euphoria is spread across the land. It's something you can't necessarily measure directly in dollar value, but higher confidence is a key ingredient to our economic smoothie. Here is a statement from the Conference Boards Lynn Franco



“Consumer confidence increased sharply in March to its highest level since December 2000 (Index, 128.6),” said Lynn Franco, Director of Economic Indicators at The Conference Board. “Consumers’ assessment of current business and labor market conditions improved considerably. Consumers also expressed much greater optimism regarding the short-term outlook for business, jobs and personal income prospects. Thus, consumers feel current economic conditions have improved over the recent period, and their renewed optimism suggests the possibility of some upside to the prospects for economic growth in the coming months.”

The Conference Board reports their number at the end of each month.  You have to pay for their data so I try to follow based upon the monthly press release.  The Index has been rising the last few months.  It hit 116.1 in February, and soared to 125.6 in March.  The University of Michigan Consumer Sentiment Index has been following the same trajectory. In fact according to their survey Sentiment is up 11.1% since October.  While the Index is still below it's 1999-2000 highs, we are on the right path.  If we can break those old highs that's good news. If not then I feel it's a tell.


Portfolio

We are in the midst of earnings season and the next few weeks will have a ton of earnings reports  from our portfolio members. This week we had no earning reports, but we did get a dividend increase from Procter & Gamble(PG).  The dividend was raised to $0.6896 from the previous $0.6695, which is an increase of 3%.  Not exactly stellar but the company has been working through a long restructuring, and let's face it the competition is intense for many product lines including portfolio member Church & Dwight(CHD). Procter & Gamble still yields 3% which is exceedingly rare in this market for a blue chip.

Interesting side note is portfolio member Diageo(DEO) the worlds largest spirit producer, is actually no longer the worlds largest spirit producer. At least by market cap. China's Kweichow Moutai Co is now the worlds largest distiller by market cap as of this week at $71.5 billion.  Diageo is right behind by only millions at this point. Kweichow gets more than 95% of it's sales from their domestic market.  To me that means there is plenty of room for growth within China.  I think Diageo is up to the challenge. The company currently generates 20% of it's sales in the Asia Pacific region.  I think they'll figure out the right strategy to boost growth which has been lagging it's other markets.

Happy Easter!

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