Market Update 2/14/2017

Agenda Markets Economic Highlights Policy and Politics Investment Idea What to Watch

I. Markets

Markets

II. Economic Highlights

Economic Highlights Bank Stocks Rally off of Hopes of Deregulation This week bank stocks rallied and the financial sector SPDR ETF (XLF) increased 2.95%. This is because of expected policy changes by the Republican administration like the repeal of the Dodd-Frank Act as well as the anticipated replacement of the Federal Reserve Board’s top bank regulator, who announced his retirement this week, by a regulator friendlier to the banking industry. OPEC Countries Cut Production OPEC countries are showing increasing compliance to production agreements and reported major production cuts. Saudi Arabia cut oil production by the most in eight years, cutting output by 717,600 barrels a day, which is 310,000 barrels below its OPEC agreement. This news didn’t significantly move the price of oil because investors believe increased U.S. oil production will offset production cuts by other countries. Greek Bailout Deal Greece says it is close to reaching a bailout deal and hopes an agreement will be reached by February 20. This news slightly raised the price of Greece’s two year bonds, but there is still concern that a deal won’t be reached if the International Monetary Fund doesn’t participate. Mexico Raises Rates as Peso Weakens Mexico’s central bank increased interest rates as the Peso continues to weaken and inflation persists as a result of Trump’s threats to renegotiate NAFTA and implement a border tax.

Tiger Cubs are Struggling Economic Highlights Apple Rallies Apple stock reached an all-time high this week as investors are optimistic about Apple releasing a new iPhone. Trump’s tax plan also boosted the stock as Apple is holding $230.2 billion in cash overseas that it plans to bring back to the US if there is tax reform. Tiger Cubs are Struggling 1-Year Return: Tiger Global Management 15% loss Maverick Capital 10% loss Viking Global Investors 4% loss A big reason for their poor performance is stocks moving in lockstep with their sector regardless of individual company fundamentals.

III. Policy and Politics

Policy and Politics US Politics An appeals court ruled against Trump’s executive order on immigration and refugees. The senate confirmed Sessions and Devos. Republicans are planning to repeal Dodd-Frank soon. Donald Trump met with aviation executives and promised “something phenomenal in terms of tax.” Donald Trump met with Japanese Prime minister Shinzo Abe for a two-day summit. French Politics Conservative populist candidate Marine Le Pen formally began her campaign this week and is currently leading in the first round of France’s two round system election. If elected, she promises to leave the EU. Currency volatility should be expected across Europe as nationalist anti-eurozone candidates are gaining support.

IV. Investment Idea

Banking Industry Investment Idea Banking stocks are a good investment because it looks likely that Republicans will loosen wall street regulations and lower taxes. It also can’t hurt that Trump has five ex-Goldman Sachs executives in his administration.

V. What to Watch

What to Watch Japan reports Q4 preliminary gross domestic product on Monday, 13 February The eurozone reports preliminary Q4 GDP on Tuesday, 14 February The United Kingdom releases consumer price data on Tuesday, 14 February The United States reports retail sales, industrial production and consumer price data on Wednesday, 15 February The UK releases January employment data on Friday 17, February