Sunday, September 17, 2017

TLH Market Review 9/17/17

"You can have to much of a good thing" - Anonymous

I'm not quite sure a lot of people would agree with that quote above if they glanced at their investment accounts lately.  When the markets keep heading higher who really wants to complain?  Well I'm sure we could find a lot of people on Twitter. On Friday the S&P 500, Dow, and Nasdaq all hit new highs.  A trifecta!  Clearly most people aren't overly concerned about North Korea firing missiles just about every day.

The indexes have piled on
some impressive gains already this year with the Nasdaq leading the charge just a smidgeon under 20%.

S&P 500: 11.68%
Dow: 12.68%
Nasdaq: 19.79%
Russell 2000: 5.50%

One thing lacking from this rally has been a weak dollar.  That's kind of unusual because back in 2014 through 2016 the dollar and S&P 500 were very highly correlated as each logged gains of 21% & 27% respectively.

Then 2017 came around and suddenly it didn't matter if the dollar was getting stronger.  Investors were still bidding up the price of equities despite seeing a 10% fall in the dollar index YTD. This matters quite a bit because foreign investors would translate this chart below back into their home currency.  Let's say for example you are a British investor in London.  Since Sterling has also appreciated versus the dollar this year(up 20%), your American investment would be showing a loss. 

The weaker dollar has been a boon for commodities, especially the metallic type. Gold, Silver, Zinc, Aluminum, and Copper are all up for the year.  Which generally means there is strong demand in the industrial space.  These are companies that make things like United Technology(UTX), 3M(MMM), portfolio members Cummin's(CMI), & Wabtec(WAB) .  The portfolio is somewhat light in this sector overall, although technically a lot of our picks do "make" plenty of products. They just serve a different end customer. 

Speaking of Cummin's it's quietly having a very good year as it's up 24%, and recently announced a new all electric truck prototype, even beating Tesla(TSLA) to the punch. The portfolio is pacing very closely with the S&P 500 YTD.  We'll have 3/4 of the year behind us in just two weeks.  So we'll start to see a pickup in earnings release very soon, including one from my favorite McCormick(MKC) on the 28th.

The remainder of the portfolio has been quiet overall.  With the exception of Procter & Gamble(PG) which has been battling with activist investor Nelson Peltz & his Trian Fund.  I generally welcome this type of interaction since it usually means better things for shareholders, and the company's future. Shares of Procter & Gamble are currently up 14% for us YTD.  Not bad for a defensive consumer goods company. 

Have a good weekend

The Long Haul Investor

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