Welcome to “The Week Ahead” where we take a moment to provide our thoughts on what we can expect in markets and the economy during the upcoming week.
The 2017 Hollywood blockbuster this year has been ANTS with FANGS! No this isn’t related to Sharknado and you haven’t seen this movie in theatres but rather within the stock market for much of this year. The FANG stocks are well known, Facebook, Amazon, Netflix, and Google (now Alphabet). The same phenomena that we’re seeing here domestically is occurring within the emerging markets as well with ANTS, which consist of Alibaba, Naspers, Tencent, and Samsung. At the end of August when emerging markets were up 25%, those four position accounted for 36% of the gains of the entire index. If you add in the next six largest tech names by market cap within the emerging markets index that percentage shot up to 46% of the gains. The remaining 832 stocks within that index accounted for the remaining 54% of the gain!
At the end of October, FANG has gained ~48% year-to-date, the tech sector has gained ~32%, while the S&P 500 has gained just shy of 17% for the same period. As part of the investment philosophy here at First Foundation we strive to maintain valuation discipline and believe that paying a fair valuation is more critical than investing in the right assets. It’s hard to predict if or when the next tech wreck will occur, but by maintaining a margin of safety approach, buying investments at a lower price, allows us to avoid much of the volatility associated to a large scale correction. Additionally, as most investors have been chasing returns, we have been focused on overlooked areas within the investment spectrum.
Next week we’ll take a look to see if inflation via CPI has gained any momentum and if the underlying economy is continuing to improve in various key Fed districts.
Data deck for November 11 – November 17:
|
Date |
Indicator |
Period |
|
November 14 |
Producer Prices & Producer Price Index |
October |
|
November 15 |
Consumer Prices & Consumer Price Index |
October |
|
November 15 |
Empire Manufacturing Index |
November |
|
November 15 |
Retail Sales |
October |
|
November 15 |
Business Inventories |
September |
|
November 16 |
Import Prices |
October |
|
November 16 |
Initial Jobless Claims |
---- |
|
November 16 |
Philadelphia Fed Survey |
November |
|
November 16 |
Industrial Production |
October |
|
November 16 |
Manufacturing Production |
October |
|
November 16 |
Home Builders Survey |
November |
|
November 17 |
Housing Starts |
October |
|
November 17 |
Kansas City Fed Survey |
November |
