Every day is a new day. It is better to be lucky. But I would rather be exact. Then when luck comes you are ready.
I can recall working at a basketball camp as a counselor in college and a head coach saying to young attendees during the morning stretch session, “It’s great to be alive.” As one gets older, you know the joy of getting up each day to see what the world has to offer. We learn each day is not going to go perfect, and one of the special things about maturing is realizing how a good night sleep and a fresh start can give you a whole new perspective. Equally as fascinating is how this applies to markets. One of the wonderful things about investing is the anticipation of waking up each day to see what it has in store. On many occasions, you wake up and nothing is going on. There are also times when you are just removing the sleep from your eyelids when a down 300 point opening hits you smack in the face (like Wednesday). Conversely, you may be in the middle of a deep yawn when you discover something really wonderful has happened, like maybe a holding is merging or being acquired at a nice high premium (it happened this week so good for us). Anyway, the unpredictability of life and investing makes it a pleasure to wake up to the world, good or bad, but we will certainly take the former over the latter.
In the markets this week, a couple of big deals set the tone as Cigna announced it will be buying pharmacy benefits manager Express Scripps for $52 billion. Also in the health care area, CVS sold $40 billion of bonds to help get read for its acquisition of Aetna. Do you think the health care industry is getting ready for Mr. Bezos? Speaking of the death star, apparently Amazon is thinking about taking on the big banks by offering bank accounts connected with Amazon Prime. On the macroeconomic front, the February jobs report came in well above the 200K estimate, as the economy created 313 thousand new positions and wages came in at a steady +2.6%, which was down from 2.9% from the prior month. Investors ate it up, although it is pretty much priced in that interest rates will be headed higher three more times for the rest of the year. Tariffs were a big topic as the market breathed a heavy sigh of relief when the Trumpers announced there will be exemptions for Canada and Mexico on the steel and aluminum levy's. More on that in a second. On the earnings front, Costco reported a big number but guidance was a touch soft, and it was pretty much the same thing with Target. Still, the large retailers are showing improved performance and the economy looks good, both globally and domestically. Estimates on global oil demand were raised to an increase of 1.8 million barrels per day as well, also supporting markets. Next week, all eyes will be on the inflation numbers mid-week, both for the consumer and producer. If they come in stronger than expected, investors will get nervous, but if it wasn’t inflation, it would be something else, deficits, money supply, earnings, so that is just part of investing.
On the political front, when Gary Cohn, Mr. Trump’s top economic adviser, resigned, it appeared markets would have a large problem. Cohn was seen as stabilizing the nationalistic wing of the administration and providing balance with a more global approach. My own thinking is I am pleased my old professor, ex UCI lecturer and Harvard MBA Peter Navarro, seems to have outlasted Mr. Cohn. For many years, Navarro spoke often about the unfairness of global trade policy, and it is only Trump who listened. Mr. Navarro walks the walk on tariffs and rightly points out that currently, the United States has the lowest tariffs of any major global country. Cohn is seen as hero for getting the tax policy passed, although really all that happened was Republicans agreed to vote for something they wanted anyway. Not one democrat joined that piece of legislation. Anyway, Cohn will go back to the private sector and earn millions, while Mr. Navarro will have a higher profile role after biding his time and serving quietly and dutifully. Good for him and I hope he gains even more influence with the mercurial president. We all know the feeling of waking up each day to unpredictability, especially with the big D in charge. It is what makes life, and the markets as well, special.
Yale Bock, Y H & C Investments, its clients, and the family of Yale Bock have positions in the securities mentioned in the blog, Investing in securities involves risk and the potential loss of ones principal. Past performance is no guarantee of future results. All investment decisions should be considered with respect to ones risk tolerance, return objectives, liquidity needs, tax considerations, and one's overall financial situation. The fact that Yale Bock has earned the right to use the Chartered Financial Analyst in no way means or guarantees financial returns which exceed those of a market index.