DIASTOLE ECONOMIC AND MARKET COMMENT
November 26, 2018
We hope you had a lovely Thanksgiving and avoided Black-Friday-driven shopper-collision-panic collapse. Is that really a thing? Maybe.
However, the markets did fall like a chocolate soufflé last week. Sucking the air out of equities were several factors, including the seventh straight week of oil prices falling, tech stocks reacting to bad news from Apple (which expects to sell fewer iPhones in the coming year) and from Facebook, which remains under heightened scrutiny after doing lots of dumb, wrong things, and third quarter retail sales, which were disappointing. Also, there are ongoing concerns about our trade wars.
The FAANG stocks contributed to shaky nerves on Wall Street. Facebook, Apple, Amazon, Netflix, and Google (now part of Alphabet) were all down more than 20% for the week. (Technically a market correction is a loss of 10% while a bear market is 20%.) Apple, which was worth over $1 trillion in August is now worth about $840 billion. Amazon, which also toyed with a market cap of $1 trillion, is now at $731 billion. The overall U.S. markets are very slightly up for the year.
But the good news for the week included those same falling oil prices, which, while not benefitting oil producers (and perhaps discouraging U.S. shale oil drillers from working for awhile) will actually help lots of transportation industries and the U.S. consumer.
The G20 summit opens in Argentina on Friday. This could set the stage for a confrontation on trade between the U.S. and China, which remain at loggerheads, with tariffs going both ways and hurting both economies. (The phrase “at loggerheads” implies two parties in an ongoing dispute, but can also refer to loggerhead turtles. You choose.) A sideline meeting for President Trump and President Putin is scheduled, and it is expected that the nations present will discuss the Saudi killing of journalist Jamal Khashoggi.
British Prime Minister Theresa May has reached a Brexit agreement with the European Union, but has to get approval from Parliament and doesn’t appear to have the votes to do so. Conservatives think the agreement keeps England too closely tied to the EU, while liberals believe a revote on the whole thing is growing more possible. Still undecided is what will happen at the border between England, which is leaving, and Ireland, which is staying. Will passports be required for the first time? Does England’s leaving the EU essentially break up the British Empire?
Last week our government issued a federally-mandated every-four-year report on climate change. Among its findings: heat waves cause more American deaths each year than hurricanes, lightning, tornadoes, earthquakes, and floods combined, and this number is expected to rise. Continuing extreme temperatures will cost U.S. workers an estimated $160 billion in lost wages by 2090, and will contribute to a growing number of wildfires. Plus our outmoded and hackable energy grid will grow ever more fragile.
The California Camp Fire is now 100% contained, which does not mean that it has been extinguished, but that a fire-proof perimeter (like dirt trenches) has been established so that it can no longer spread. Pacific Gas and Electric disclosed that there was a second power-line failure on the morning of November 8th, when the Camp Fire first erupted. 85 people are confirmed dead, while about 250 remain missing. The fire has burned an area roughly the size of Chicago, and destroyed 14,000 homes, 514 businesses, and 4,265 other buildings.
Polar night has begun in Utqiagvik, Alaska (formerly Barrow). Every year, the town of 4,000 goes for 65 straight days without a sunrise. The town sits well above the Arctic Circle. In the summer, by contrast, the town will have an equal period with no sunsets. Not sure what that would feel like? Binge-watch “Northern Exposure”!
Last week ten paintings sold for more than $25 million at auction. Among them was David Hockney’s Portrait of an Artist (Pool with Two Figures), which sold for $90,312,500 - a record for a living artist. Hockney originally sold this painting in 1972 for $18,000 (probably half of which went to his dealer) and will not see any of the proceeds of this record sale.
Diastole is proud to announce that we are helping this year’s Toy Closet toy drive to benefit the children at Yale-New Haven Children’s Hospital. Feel free to stop in, say hi, grab a candy cane, and donate a new, unwrapped toy. Stuffed toys are not accepted by the hospital because of germ issues, and toys must be no longer than 24 inches. Children of all ages will be grateful!
For the week ending November 23rd, the Standard & Poor’s 500 Index finished at 2,632, down 3.7% for the week and up .2% for the year. The Dow Jones Industrials closed at 24,285, down 4.4% for the week but up .3% for the year. And the Nasdaq Composite Index was at 6,938, down 4.25% for the week and up 1.5% for the year. The yield on the ten-year Treasury Note finished at 3.04%. West Texas Intermediate (WTI) crude oil fell to $50.42 per barrel, while gold sold for $1,221.00 per ounce, and one Euro was worth $1.13.
Elizabeth E. Cook
News and information presented here was gathered from sources believed, but not guaranteed, to be reliable, including The New York Times, The Wall Street Journal, Bloomberg, businessinsider.com, Barron’s, The Economist, Reuters, and The Associated Press. If you have any questions, please call us at 203.458.5220 or reply to this email. Thank you for your time during this busy season!