Week of Feb 26 2016 Weekly Recap & The Week Ahead
“I’m more concerned about controlling the downside. Learn to take the losses. The most important thing about making money is not to let your losses get out of hand.” – Marty Schwartz.
1. Trump Wins Nevada GOP Caucuses — Donald Trump won the Nevada caucuses last Tuesday night, adding a third straight victory in his drive for the Republican presidential nomination. “Markets are in a state of suspended disbelief. I don’t think they’ve seen anything like this. No one has seen anything like this,” said Mike Thompson, Chairman at S&P’s Investment Advisory Services.
2. JPMorgan (JPM) Warns On Energy Bad Loans — JPMorgan is adding another $500M to energy-related loan-loss reserves. This followed a $67M provision in Q4, which at the time brought total oil and gas loss reserves to $815M (vs. a portfolio with book value of $44B).In addition, the bank said it could need to add another $1.5B to reserves should oil hang around $25 per barrel over the next 18 months.
3. China Stocks Dive 6.4% Ahead of G20 Meeting — the Chinese market index dropped 6.4% late last week, extending its fall this year to 22%, as surging money-market rates signaled tighter liquidity and the offshore yuan weakened for a fifth day, while the country’s vice finance minister warned of pressure on exports. The plunge comes as world leaders gather for a G20 meeting in Shanghai, where current market turmoil and a global economic slowdown are expected to be key topics of discussion.
4. Moody’s Cuts Brazil’s Rating to Junk — Moody’s cuts Brazil’s sovereign credit rating to Ba2 from Baa3, two notches into junk territory, with a negative outlook, citing uncertainty over the effort to impeach Pres. President Rousseff and the corruption scandal that has paralyzed the country’s leadership and slowed efforts to shore up its crumbling finances. Samar Maziad, Moody’s lead analyst for Brazil stated “There’s very little visibility on what the future will be.”
5. 4Q GDP Revised to 1% from 0.7% — the U.S. economic growth in the fourth quarter was marked up slightly to 1%, but that was mainly because of a bigger stockpiling of inventories. The initial report was 0.7% rate. The value of inventories, which adds to GDP, rose by $81.7 billion instead of $68.6 billion as initially reported. Consumers boosted spending by 2% in the fourth quarter, but that was down from an initial 2.2% estimate and was much weaker compared with the spring and fall.
6. S&P 500 Gained More Than 1.5% a Day for Three Consecutive Days Historical Pattern — the chart below provides a snapshot of each kickoff rally (dashed green line) and how the S&P 500 did 60 trading days (about three months) prior, and 255 trading days (above one year) thereafter.
The week ahead — Economic data from Econoday.com:
