Saturday, April 8, 2017

TLH Market Review - 4/8/17

Well the big news this week was President Donald Trump firing off Tomahawk missiles, 59 to be exact, into Syria. I won't comment on the political ramifications of the whole ordeal, but it makes you think of all the innocent lives lost in wars over the centuries.  Sad.

Other than that we had the FOMC minutes released from the meeting where interest rates were raised.  What was interesting for most people was the Fed actually discussed it's balance, and taking steps to reduce it's size this year.  Any contraction in the Fed's balance sheet would actually be a deflationary/"contractionary" for the economy.  The reason being is this action would actually take money out of the economy. Here is part of the Fed's comment  

"...most participants anticipated that gradual increases in the federal funds rate would continue and judged that a change to the Committee’s reinvestment policy would likely be appropriate later this year.”

What did get overshadowed this week was the ISM Services Index that came in at 55.2 under expectations for a 57.0 reading. While not a huge deal since anything over 50 shows expansion. Services still account for the lions share of our economy.  If we start seeing readings closer to 51-52 then we can start getting concerned. The ISM Index was a bit stronger at 57.2 vs expectations of 57.0.

The big report this week was the bad jobs number we received. NFP showed a total gain of 89k jobs. That's way below expectations for 175k, and paltry compared to the prior reading of 221k.  Not exactly a great number especially when our Chief keeps talking about bringing the jobs back. For now we can chalk it up as a one off.

So how did the markets react to all this?  Actually quite well.  The S&P had some down time this week, but only ended up -0.3% lower despite all this big news. Not exactly what many people would expect. If this were 4-5 years ago I think we would have seen some big 1-3% moves for the week.

Earnings seasons starts in earnest next week. We received a some news reports from a few portfolio holdings.

McCormick(MKC) which got pummeled after its earnings report, had better reception after it's
investor's day. The stock hasn't recovered all it's losses since earnings last week. With projected EPS growth of 9-11% there is still a lot to get excited about for this blue chip.

Costco(COST) reported same store sales growth that really blew away expectations.  Total company sales for March were up 6%, and when excluding gasoline and foreign exchange fluctuations sales were up 5%.  Those are some solid numbers from consumers that have continued to be fickle, and at odds with other retailers still struggling with the "Amazon" effect.  That's why Costco is in the portfolio.  Sure they'll lose some sales, but it occupies a nice niche that's not easily replicated online. I'm expecting good things from this company the next few years.

I'm still working on updating the portfolio results for Q1.  I'm updating a lot including another performance tracking mechanism to the portfolio. You'll see what I mean when I get the results out in a couple days. 

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