Weekly Market Review & Target Fills November Week 4

The major news for the week, was the current rally in the global equity markets including the United States, following the news of a Trump victory in the U.S. presidential elections. All four main indices in the United States, hit new lifetime closing highs at the same time. This is the first occurrence since December 31, 1999. The main index, the Dow, has now surpassed 19,000.

There are some analysts that are worried that many American based stocks are now overvalued, with an average P/E (price earning ratio) of 23. In addition, there has been more than $500 billion USD (United States Dollar) in share buybacks, by firms in the United States.

Global dividends are falling at the fastest pace, since mid 2015 in the third quarter.

In the United States, dividend growth in the third quarter, is at a post financial crisis low. Payouts were down -7% to $100.4 billion USD.

The American dollar USD is continuing to climb against the Euro. Financial analysts are already discussing parity between the two currencies. USD is up more than 7.5% against the major currencies of the world, in the last 3 months alone.

Another concern among global investors remains that major central banks, will soon hit the brakes on any further stimulus.

Slightly better economic data from the United States, puts the investor likelihood of a hike in interest rates at near 100%.

Some officials at the European Central Bank (ECB), are already suggesting the present stimulus efforts, ought to be rolled back. They do acknowledge given the high volume of bonds and assets now being purchased, it will require a gradual winding down, to maintain financial stability.

International News

Despite the repeated talks to reduce crude production within OPEC (Organization of the Petroleum Exporting Countries), output still far exceeds present demand.

OPEC is promoting a cut in production of crude oil within its membership, of between 4% and 4.5%. Such a reduction, would remove more than 1.2 million barrels per day from the global market.

At this point, neither Libya nor Nigeria are included in the output reduction deal.

Iraq will have to pay compensation, to international oil companies for any limits placed by an OPEC deal on output cuts. This lessens the likelihood of a cartel wide production limit.

Iran would also like to increase production further, to meet pre-sanctions levels of output.

Final levels of crude production for individual countries,are to be worked at the meeting of OPEC in Vienna, Austria at the end of the 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 in 2008.

Crude oil prices continue their climb earlier this week on the belief among investors, that an output agreement is likely. Yet on Friday, oil remains below $47 USD again in the United States and below $48 USD in Asia and Europe.

Another ongoing event, is the drop in precious metals over the last few weeks. The underlining cause for this, has been the rising valuation of the American dollar.

Gold had been slowly dipping in price, since reaching a high of $1,370.80 USD in August. A major set back took place two months 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.

Two weeks ago gold was listed for $1221.40 from $1302.70 USD the week before, a decrease of 16.17%.

Last week gold was being sold for $1209.20, this week the price fell even further to 1,181.70 an additional decline of 2.33%.

Gold prices are still up +12% in 2016.

The price for silver decreased to $16.57 USD from $19.43 USD over the past 8 weeks, a $2.86 USD dip, which is an 17.33% decline for the period.

Silver is still up near 15% for the year.

Global trade is experiencing the weakest rate of growth since 2007.

Pacific Rim leaders gather in Peru,over the prospects of what a Trump Presidency will mean for the U.S lead Trans-Pacific Partnership Agreement (TPPA).

Protectionist policies are on the rise and progress on two leading trade treaties have stalled. Political support for the 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). Both Canada and Mexico have expressed willingness to reopen negotiations, but have their own list of demands if talks resume.

China and Russia are now both pushing for a free trade area, in the Asia-Pacific region.

United States

The American dollar is at 13 year high in valuation this week, against a basket of other currencies, as global bonds and emerging market currencies remain lower.

The 10 year Treasury yields remain at their highest rates this year, now at 2.36%.

U.S. bond yields were set for biggest 3 week rise in 15 years. They are now at near 14 year records, as investors calculate that inflation and interest rates are heading higher.

All 4 market exchanges in the United States (U.S.) rose this week. The Dow Jones Industrial Averages is now near 19,100, from 18,000 three weeks ago. The Dow, the Standard & Poor 500,the NASDAQ and the Russell 2000 composites, all reached new life time high this week.

The highs on Friday were 19,146.22 for the Dow, 2,213.03 for the S&P 500, the NASDAQ was at 5,398.92 and the Russell 2000 was at 1,345.39.

Year to date, the major indexes have advanced the following: The Dow Jones Industrial Averages is up  9.9%, the Standard & Poor 500 has increased over 8%, the tech heavy NASDAQ has advanced 7.8%, and the Russell 2000 Index for firms with smaller capitalization, is up near 18%.

In related news, there now has been five business quarters of declining corporate revenues and profits.

New orders for manufactured goods in the United States, rebounded last month. There was a rising demand for machinery and other equipment.

The 30 year rate on U.S. mortgages spikes to 4.03% this week. It culminates a more than 1% rise in a matter of weeks.

October sales for new homes in the United States, came in at 563,000 annual adjusted rate. Existing home sales reached an annual adjusted rate of 5.6 million last month. The sale of existing homes are now at a 9 ½ year high, amid pent up demand and the calculation higher interest rates are on the way.

The United Department of Treasury has issued a second license to Airbus, for the sale of 106 commercial planes to Iran. The action is likely to be reversed, once President-elect Trump assumes office.

A United States District Judge has issued a nationwide injunction, blocking a new regulation put into force by President Obama concerning overtime pay. The new law would of entitled millions of new American workers, for overtime pay. At the same time, it would of raised costs for both government entities and private employers.

President-elect Trump is calling for a $1 trillion USD infrastructure package, $5 trillion USD in tax cuts and increases in military spending.

Given the supposed government increase in deficit spending, a number of Republican lawmakers are already warning Mr Trump that debt, will remain an obstacle in enacting his agenda

Africa

In Zimbabwe, 92 year old President Robert Mugabe is printing a new currency that will coincide with the American dollar. The latter is  dwindling in supply. The action jeopardizes not just the domestic economy, but the long grip on power held by Mugabe.

Europe

Euro-zone business is now expanding at the fastest rate this month, than it has all year. This is due to strong activity in manufacturing and a surge in new orders, as prices held steady.

The European Parliament President Martin Schulz, is stepping down in January. He will be participating in the German elections of 2017. Some pundits see him a potential challenger to Chancellor Angela Merkel, who has announced she will be running for a 4^th term.  She has been in office since 2005.

German GDP (Gross Domestic Product) has dropped by 50% in the third business quarter. Economic growth was now estimated to be only 0.2%.

A summit between European Union (EU) leaders and the Ukraine, moved to extend sanctions on Russia over its annexation of Crimea and involvement in the civil war in eastern Ukraine.

After two days of talks this week on reunifying the island nation of Cyprus, negotiations broke down between the Greek and Turkish Cypriot leaders.

The European Parliament voted affirmative this week, on creating a EU wide system of rapid movement for all defensive forces.

Overall growth in the United Kingdom remains at 0.50%, despite the uncertainty created by the vote on Brexit. Consumer spending and firms both, saw growth in the third quarter. Household spending is up 0.7% from the second quarter and business investment increased 0.9%.

In France, former President Sarkozy was beaten in the center-right primary.

Mr. Sarkozy in turn endorsed Francois Fillion, a moderate who finished first in the conservative primary.

GDP growth was 0.3% in the Euro-zone at large in Quarter 3, at an 1.6% annual basis. The bloc expects growth at 1.7% for 2016 and 1.5% in 2017. Economic growth was 2% in 2015.

ECB head Mario Draghi, will extend the 1.7 trillion Euro ($1.8 billion USD) bond purchasing program next month. However, he is warning political leaders that the Euro-zone economy is too reliant, on central bank stimulus. He also has stated there are many risks to stability of the European economy as a whole.

The Prime Minister of the United Kingdom is seeking a transitional Brexit deal with the EU. This will help lessen the fears of business leaders.

The 2017 national elections in France, Germany and the Netherlands, will likely be influenced by the Brexit vote in the United Kingdom and the electoral victory of Donald Trump in the United States.

Russia

It has been calculated by analysts that Russia has no plan ready, to either cut or freeze present production levels of crude. An agreement will be needed among leading oil producers, if Russia is to participate in the OPEC led reduction.

Russia is in the process of deploying short range ballistic missiles in the enclave of Kalingrad, which is the most western part of the country. Russian President Putin claims this was in response to recent aggressive moves and troop deployments by NATO (North American Treaty Organization).

Latin America

In Colombia the government and the FARC rebels agree on a new peace pact, that will end the 52 year insurgency. It is the longest one in Latin American history. The latest signing comes just 7 weeks after the original deal. The previous one was narrowly rejected, by voters in a referendum. President Santos is now seeking congressional ratification, rather than another popular vote.

Brazil is attempting to exit the worst recession in 80 years. However, due to sluggish growth and ongoing government disorder, economic growth for 2017 has now been reduced from 1.6% to 1%.

Middle East

Iran is warning the United States that extending sanctions on the country, would be a breach of the nuclear deal. The Iranian government is threatening retaliation, if the 10 year old sanctions continue.

In Turkey, the government is continuing the dismissal of civil servants and military personnel this week. The additional 15,000, now brings the total that have been fired or suspended, to more than 110,000 individuals.

President Tayyip Erdogan is threatening to open national borders, creating another surge of migrants headed towards Europe. This occurred a day after European Union lawmakers, voted for a temporary halt to membership talks between the EU and Turkey.

The Turkish central bank faced with a currency that has declined by 15% this year, has raised interest rates for the first time in almost 3 years. The Turkish lira is now at a record low, having dropped by over 9% this month alone, due to the rising strength of USD and disputes with Europe.

Asia

Prosecutors in South Korea raided the offices of the Samsung group and the National Pension Plan.

The scandals surrounding South Korean President Park Geun-hye are growing, as are calls for her impeachment.

The Bank of Japan is in an epic struggle, which it is losing, in the effort to stem deflation and a stagnate domestic economy. With policy options diminishing, October was the 8^th month in a row, of a decline in core consumer prices.

China

After a 7 year ban in China, Facebook would like to regain access to the 700 to 800 million potential Chinese customers. As an incentive to the government to allow the social media giant back into the country, Facebook has developed a censorship tool.

The Chinese government is likely to issue a ban on smoking in public places, later this year. The country which has more than 300 million smokers, is the worlds largest producer and consumer of tobacco products.

Energy News

American West Texas Intermediate (WTI) has decreased in price from $49.39 USD four weeks ago, to $43.91 USD three weeks ago, a decline of 12.48%. Two weeks ago, the price had dipped to $43.17 USD.

International Brent during the same period went from $50.18 a month ago, to $45.45 USD three weeks ago. This was an overall decline in price of 10.41%. Two weeks ago, the price dipped further to $44.55 USD.

Last week WTI came in at $45.16 USD, this week the price increased to $46.75 USD. This amounts to a 3.52% advance.

Last week Brent was at $46.35 USD, this week it was listed for $47.63 USD. This is an increase of 2.76%.

U.S. weekly oil inventories were drawn down by 1.26 million barrels.

American priced and Brent crude oil are both up about +27% in 2016.

The Investment Newsletter had 0 target fills to report this week, and 0 early stock target fills.