The major news for the week, was the dramatic drop in the global equity markets including the United States, following the news of a Donald Trump victory in the U.S. presidential elections. The major exchange the Dow Jones Industrial (Dow), plunged 800 points. This was a drop of over 4%.
The following morning the losses were reversed and by Thursday, the main indices in the United States and in Germany hit new highs. The Dow peaked at 18,873.66 a new all time high. The German Dax reached a new high for the year at 10.793.97.
The Dow had its best week in 5 years and had its highest closing ever at 18,847.66.
The concern among global investors is the major central banks will hit the brakes on any further stimulus. Slightly better economic data from the United States, puts the likelihood of a hike in interest rates there at 72%. The Federal Reserve Bank decided last week to leave rates unchanged for the month of November, but will likely raise rates next month by 0.25%.
In an ominous sign for the nuclear deal signed with Iran last year, the United Nations has now once again reported that the country is violating key elements of the deal. This threatens to undo one of the key foreign policy elements of the now outgoing U.S. President Obama.
The global rout in the bond market accelerated as the week ends, as the euphoria over the election of Donald Trump continued.
Investors in emerging markets, are fearful that better economic conditions and higher interest rates in the United States under a President Trump, will create a capital outflow.
Despite the repeated agreements to freeze or reduce crude production within OPEC (Organization of the Petroleum Exporting Countries) output is still continuing to rise.
There are still no definite agreements with non-OPEC producers namely Brazil, Canada, Kazakhstan and Russia, to agree to a production limit at this time.
Crude output increased by 800,000 barrels in October, to 97.8 million barrels a day.
Crude oil prices are now below $44 USD (United States Dollar) again in the United States and below $45 USD in Asia and Europe.
Final levels of crude production for individual countries,are to be worked at the meeting of OPEC in Vienna, Austria later this month. If an agreement is made, it will be the first time the cartel has been able to agree to output cuts since the financial crisis.
Another ongoing event is the drop in precious metals over the last few weeks. Gold had been slowly dipping in price, since reaching a high of $1,370.80 USD in August. A major set back took place a five weeks ago. The price dropped to $1256.90 from $1326.00, a decrease of $69.10 USD (5.50%) It was a drop of 9.06% from the recent high.
This week gold is listed for $1221.40 from $1302.70 USD last week a decrease of 16.17%. Gold prices in 2016, are still up +15% in 2016.
The price for silver decreased to $17.31 USD from $19.43 USD over the past 6 weeks, a $2.12 USD dip which is an 12.25% decline for the period.
Silver is still up near 20% for the year.
Global trade is experiencing the weakest rate of growth since 2007.
Protectionist policies are on the rise and progress on two leading trade treaties have stalled. Political support for the Trans-Pacific Partnership Agreement (TPPA) and the Trans-Atlantic Trade and Investment Partnership (TTIP) is declining in both Europe and the United States. These trends are ominous signs for world equity and bond markets.
U.S. President-elect Trump wants to renegotiate NAFTA (North American Free Trade Agreement). Although Canada is open to the idea, Mexico is not as willing to do so.
In the United States presidential election, businessman Donald J. Trump won the presidential electoral vote on November 08th. On Friday, Arizona added 11 more electoral votes to the Trump column. This brings the total to 290 versus the Hillary Clinton total of 228. Michigan is of yet undecided with 16 electoral votes and New Hampshire at 4 are still undecided. Trump is ahead in the former state and Clinton in the latter.
In the popular vote, Hillary Clinton leads Donald Trump by 60,467,245 to 60,071,650.
The House of Representatives will remain in Republican hands with a total of 241 seats out of 435, after losing 5 seats to the Democrats.
Correspondingly, the Democrats will raise their membership from 186 to 194. The three vacant seats were also filled by Democrats.
In the Senate, Republicans will also retain their majority with 51 seats out of 100, from the previous 54. Democrats gained 2 seats bringing their total to 46. The two independents caucus with the Democrats. So they can muster 48 votes.
The remaining seat from Louisiana, will be determined in a runoff to be held next month. The Republican candidate is ahead in the polls.
In the states, 34 out of 50 governors are now Republican.
All 3 market exchanges in the United States (U.S.) saw a rise since Wednesday morning for the rest of the week. The Dow Jones Industrial Averages is now near 18,800 from 18,000 last week. The Standard & Poor 500 & the NASDAQ composite results increased, but were lower.
The gains were being led by the banks, healthcare and medical stocks
There were losses in the multinational tech companies, including Apple, Amazon, Microsoft, Facebook, and Google.
The 10 year Treasury yields were at their highest rate since January.
The Standard & Poor Credit Agency reaffirmed the United States credit rating at AA+ and a stable outlook. This is due to institutional strength and the check and balances prevalent in the American political system, that an election by itself does not change.
Year to date, the major indexes have advanced the following. The Dow Jones Industrial Averages is up 7.88%, the Standard & Poor 500 has increased 5.74% and the tech heavy NASDAQ has advanced about 4.31%.
There now has been five business quarters of declining corporate revenues and profits.
Opposition leaders warn in the Democratic Republic of Congo that the country faces civil war, if current President Joseph Kabila, does not give up power when his mandate ends.
Rising tensions with Russia resulted in having 300,000 NATO (North Atlantic Treaty Organization) troops put on ‘high alert’ in a move to response to recent provocative Russian weapons testing and military aggression.
Euro-zone economic growth remained steady in the 3rd quarter at 0.3%. This would indicate a 1.6% rate of growth for the year.
In the United Kingdom, the high court has ruled that the government cannot start negotiations to leave the European Union (EU) without a vote from Parliament.
Scotland’s government has decided to join a challenge to Prime Minister May’s push, to begin withdrawal from the EU (Brexit), without parliamentary vote giving consent.
President Putin has announced that Russia is ready to restore full relations with the United States, once Mr. Trump becomes President in January.
Industrial production in Germany dipped -1.8% dip, the fastest pace in over 2 yrs in September. Although growth will be lower, the economy is excepted to have a rebound this quarter.
The Mexican central bank had developed a contingency plan in case of a Donald Trump victory in the U.S. elections. Financial authorities were expecting financial and economic repercussions, from a Trump Administration.
They were not disappointed. The Mexican peso plunged 13%, following the U.S. election, to life time lows. The Mexican central bank resisted intervening in support of their currency.
The political uncertainty in Brazil increased this week. Lawyers for the impeached former President Dilma Rousseff, have presented evidence that conservative President Michel Temer, accepted bribes from a construction firm. If this proves to be true, he might be impeached as well.
Iraqis and Kurdish forces with the assistance of the United States, have entered the suburbs of Mosul. It is the second largest city in Iraq. Once retaken, it virtually ends ISIS ( Islamic State of Iraq and Syria) control over northern Iraq and signals the end of the short lived caliphate.
Egypt was able to secure a $2 billion USD loan from international banks. This was done before IMF’s (International Monetary Fund) board considers a $12 billion USD loan to restore investor confidence and financial stability within the country.
Central banks in Asia have moved to stabilize their currencies in response to the currency movements following the electoral victory of President-elect Trump. They are fearful new economic and financial policies in the United States will lead to currency outflows and a reduction in their vital export markets.
The president of South Korea has become engulfed in a scandal involving cronyism. There have been massive demonstrations, calling for her resignation.
The country is already reeling economically from the collapse of Hanjin Shipping, the recall of the Samsung Note 7 and the head of the Lotte Group who has been indicted for embezzlement.
Chinese October trade data fell well below expectations. Battered be weak demand ,the 2nd largest global economy saw exports fall -7.3% on the year,while imports dropped 1.4%.
China has appointed a new finance minister,Xiao Jie. This was done as concerns grow over rising fiscal deficits and mounting Chinese debt, which is now at more than 250% of GDP (Gross Domestic Product).
China will be pushing for a free trade area at a summit in Peru after Trump’s win dashes the likelihood of a US-led free trade pact. It dooms American participation in the TTIP.
The central bank of New Zealand lowers their main interest rate 25 bps to record low 1.75%. This is the first central bank that is responding to the market volatility, caused by the United States election.
Prime Minster Narendra Modi of India will take existing the 500 & 1000 rupee notes out of circulation in an effort to curb corruption.
American West Texas Intermediate (WTI) has decreased in price from $49.39 USD two week ago to $43.91 USD last week, a decline of 12.48%. Today the price dipped to $43.17 International Brent during the same period went from $50.18 two weeks ago, to $45.45 USD last week. This would be an overall decline in price of 10.41%. Today the price dipped further to $44.55 USD.
American priced and Brent crude oil are both near 1 month lows, but still up about +20% in 2016.
The Investment Newsletter had 6 target fills to report this week, and 0 early stock target fills.
Netflix $NFLX bought as a short on 10/24/16 for $127.56. Short Term Target Fill on 11/10/16 at $115.96, a 10% return for investors.
Blackberry $BBRY bought as a short at $7.99 on 10/03/16. Medium Term Target Fill on 11/09/16 at $6.94, a 15.13% return for investors.
Tesla $TSLA bought as a short for $221.99 on 07/25/16 Long Term Target Fill on 11/09/16 at $184.99, a 20.00% return for investors.
Advanced Auto Parts $AAP bought as a short at $154.99 on 06/22/16. Medium Term Target on 11/09/16 at $134.77, a 15% return for investors.
Pengrowth Energy $PGH bought as a short on 08/04/16 for $1.55. Long Term Target Fill on 11/11/16 at $1.29, a 20.16% return for investors.
Old Dominion $ODFL bought long on 11/14/14 for $76.99. Short Term Target Fill at $82.00 on 11/11/16, a 6.51% return.