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Market Recap – Time is the Greatest Ally

Market Digest – Week Ending 8/12

A series of mixed economic reports left US stocks flattish for a second straight week. The dollar declined modestly, contributing to gains in most commodities. Wal-Mart lifted its profit outlook, Praxair suggested it may complete a mega-merger with Germany’s Linde, and Uber said it would begin using self-driving vehicles this month, though a driver will still be present with their hands on the wheel. Facing falling polling numbers, Donald Trump shook up his campaign staff and named Steve Bannon, head of right wing website Breitbart, as chief executive.

Weekly Returns:

S&P 500: 2,184 (+0.0%)
FTSE All-World ex-US: (+0.1%)
US 10 Year Treasury Yield: 1.58% (+0.07%)
Gold: $1,336 (-0.2%)
USD/EUR: $1.113 (+1.5%)

Major Events:

•Monday – Honeywell was said to be in talks to buy JDA Software for $3 billion.
•Tuesday – Praxair was said to be in talks to combine with Linde. Both companies are worth around $30 billion.
•Wednesday – Cisco announced it will cut 5,500 workers, about 7% of its staff.
•Thursday – Brent Crude topped $50 for the first time in six weeks as the largest producers considered a production freeze and the dollar fell.
•Thursday – Uber said it would put 100 driverless cars on the road in Pittsburg as soon as within the next two weeks.

Our take:

Next week marks the one year anniversary of the August 24 “flash crash”. On that day, concerns about a hard landing in China and a possible devaluation of the Yuan led to unusual selling early in the trading day. Chinese stocks lost 8%, while the US market opened down about 7% before gaining back about half of that throughout the day.

It feels like a different world from this summer which, other than a mild hiccup around Brexit, has enjoyed extreme calm and fairly consistent gains. Nothing has really changed in China and there is still risk of a major banking crisis there. But nothing bad has happened and sometimes time is the greatest ally. Just as the Greek debt crisis has vanished from the headlines and from having market impact, so has China. When it comes to stocks, it is fairly common to see things that seem like huge problems just fade away.

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Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.

Craig Birk leads the Personal Capital Advisors Investment Committee and serves as Chief Investment Officer. His focus is translating improvements in technology into better financial lives. Craig has been widely quoted in the Wall Street Journal, Bloomberg, CNN Money, the Washington Post and elsewhere. Prior to Personal Capital Advisors, he was a leader within the portfolio management team at Fisher Investments, helping assets under management grow from $1.5 billion to over $40 billion. Craig graduated from the University of California at San Diego and has earned the Certified Financial Planner® designation.
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