The Enhanced Investor Weekly Macro
February 26, 2017
ENHANCED INVESTOR WEEKLY WRAP & UPDATE Market Wrap and Update Good Evening everyone! I hope you all had a good week. Let’s get right into it‌ In the week ahead, global financial markets will focus on U.S. President Donald Trump's address to Congress on Tuesday for further details on his promises of tax reform, deregulation and infrastructure spending. This will be key, as I outline just as to why below. This week is also peppered with a handful of Fed appearances, most importantly Fed Chair Janet Yellen on Friday, as investors look for further hints on the timing of the next U.S. rate hike. In addition, market players will keep an eye out on a revised reading of fourth-quarter U.S. growth data to gauge the strength of the economy. Meanwhile, in the U.K., traders will focus on a trio of reports on activity in the manufacturing, construction and services sectors for further indications on the continued effect that the Brexit decision is having on the economy. Elsewhere, investors will await monthly inflation data out of the euro zone to assess the timing of when the European Central Bank will start unwinding its massive asset purchase program.
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President Trump's Address to Congress
President Trump will make his first major address to Congress at 9:00PM ET on Tuesday. Investors are hopeful he will shed light on his economic agenda, most notably tax reform. If he notes tax cuts, this will provide a form of fiscal stimulus, which has a wide-range of implications for the market. Markets will undoubtably continue to roar as tax cuts translate into increased consumption via extra money in your paychecks. Market players will be paying close attention to comments about a potential border adjustment tax, which would put a 20% tax on imports into the U.S. but not tax exports.
The Enhanced Investor Weekly Macro
The President can introduce fiscal stimulus plans byway of tax cuts and investments in infrastructure, defense, and education spending. Markets UP.
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The Enhanced Investor Weekly Macro
February 26, 2017
Beyond tax reform, investors will be eager to learn more about Trump's plans for repealing the Affordable Care Act, reducing regulations on businesses and increasing infrastructure spending. Analysts warned that market sentiment could take a hit if Trump's plans look slow to execute or are overly vague - and they’re correct. Definitive infrastructure spending will assuredly increase spending, consumer confidence and the markets will continue to respond accordingly (positively). President Trump has been credited with being a major catalyst behind the stock market's impressive rally in recent weeks, although he has yet to outline his economic policies in detail. He’s going to have to outline a plan soon, or people are going to start selling. 2. Fed Chair Janet Yellen Speaks A handful of Fed policymakers are due to make public appearances this week that may offer insight on interest rate hikes ahead of the central bank's March meeting. Dallas Fed President Rob Kaplan will make a public appearance tomorrow. On Tuesday, San Francisco Fed President John Williams and St. Louis Fed President James Bullard are on tap. Dallas Fed's Kaplan and Fed Governor Lael Brainard (speaking at Harvard and I’m going!) are scheduled to speak Wednesday. On Thursday, Cleveland Fed President Loretta Mester speaks. Finally, on Friday, Chicago Fed President Charles Evans, Richmond Fed President Jeffery Lacker, Fed Governor Jerome Powell and Fed Vice Chair Stanley Fischer will deliver remarks. Any reduction of expectations At 1:00PM ET Friday, Fed Chair Janet Yellen perceived by the markets will speak on the economy to the Executives regarding stimulus results in a Club of Chicago. market selloff.
Last week, minutes from the Fed's latest meeting Interest rate increases are mechanism used by the Federal showed policymakers thought it may be Reserve to reduce the money appropriate to raise interest rates again "fairly supply (something Trump and soon", although it gave no firm signal on the Wall Street do not want). timing of its next rate move. Monetary policy can balance fiscal policy.
When fiscal stimulus hits Main Street, big banks on Wall Street access increased/excess reserves making more loans to consumers while increasing the money multiplier. Markets UP.
Fed fund futures priced in about a 27% chance of a rate hike in March. Odds of a May increase was seen at 52%, while June odds were at around 70%.
The Enhanced Investor Weekly Macro
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The Enhanced Investor Weekly Macro
February 26, 2017
3. U.S. Revised 4th Quarter Growth Data The U.S. is to release revised figures on 4th quarter economic growth at 8:30AM ET (13:30GMT) Tuesday. The data is expected to show that the economy expanded at a healthy 2.1% annual rate in the final three months of 2016, upwardly revised from a preliminary estimate of 1.9%. If it truly is 2.1%, the markets will continue upward. Besides the GDP report, this week's calendar also features U.S. data on durable goods orders and pending home sales on Monday, consumer confidence on Tuesday, personal consumption expenditures and ISM manufacturing on Wednesday, weekly jobless claims on Thursday followed by the ISM non-manufacturing survey on Friday. A recent string of solid data reinforced the view that the U.S. economy is sufficiently robust to warrant higher interest rates in the months ahead. 4. U.K. February PMI’s The U.K. will release readings on February manufacturing sector activity on Wednesday, followed by a report on the construction sector on Thursday and the service sector on Friday. The manufacturing PMI is forecast to inch down to 55.5 from 55.9 a month earlier, construction activity is expected to improve slightly to 52.4 from 52.2, while a survey on Britain's giant services sector is forecast to dip to 54.2 from 54.5 last month. The Bank of England raised its forecasts for growth and inflation earlier this month, but appeared in no rush to raise interest rates. 5. Euro Zone Flash February Inflation Figures The euro zone will publish flash inflation figures for February at 10:00GMT (5:00AM ET) Thursday. The consensus forecast is that the report will show consumer prices rose 2%, reaching the European Central Bank's target and accelerating from a gain of 1.8% in January. Core prices are expected to increase 0.9%, unchanged from the prior month. Spain, France, Italy and Germany will produce their own CPI reports throughout the week. Despite the upward trend in inflation, ECB President Mario Draghi recently downplayed the significance of rising consumer prices, saying that underlying inflation pressure remains “subdued.” The ECB wants to pump more and more money to spur inflation.
The Enhanced Investor Weekly Macro
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The Enhanced Investor Weekly Macro
February 26, 2017
Long-Term Stock Ideas As I said last week and the week before; I like Morgan Stanley (and there’s a reason why). With a P/E over 15.5 and strong growth, MS could have a significant leg up. I also like Morgan Stanley because I’m currently speaking to them about bringing me on prior to the Summer Session and I’m going to be working on a Global Initiative Fund in the process. Otherwise, keep an eye on the metals sector. Gold cruised through $1,250 and should now test $1,300. unless we get some very hawkish rhetoric from the Fed speakers this week. Unfortunately, this hasn't translated into positive movement in miners. There’s actually been more divergence than anything in metals.
ETF’s: ERX and GUSH (only if Oil breaks over $55)
The Enhanced Investor Weekly Macro
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The Enhanced Investor Weekly Macro
February 26, 2017
The Enhanced Investor Weekly Macro
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The Enhanced Investor Weekly Macro
February 26, 2017
Education I’m currently working on a fund that will be presented to Morgan Stanley and JP Morgan Chase in May. It will be known as the Morgan Stanley Global Initiative Fund. Although the policy will take a few months to layer, the project is being supported by the Davis Center for Russian and Eurasian Studies and the International Center for Emerging Markets Research based out of Moscow. I have a few PhD candidates assisting with the quantitative measures, but other than that - it’s my show. The initiative is being constructed to positively impact over 3 billion people world-wide. Through various angel investment groups, multinational corporations, and governments, we are constructing a comprehensive fund that will have a high multiplier and improve the planetary boundaries index, all while growing the global GDP by a factor of (X) for several generations. This initiative has the potential to create hundreds of millions of new jobs, while improving global wealth, education, and healthcare. Our hope is that this serves as a template for advanced economies around the world. It will combine the largest companies in the world as they commit funds into a global infrastructure deal. The proposed core of companies include: Clean Plates PepsiCo Google Oracle Apple US Steel Turner Construction McKinley Royal Dutch Shell ExxonMobil Chevron Tesla AWK/WTR/AWR Verizon Transocean Siemens Caterpillar As I continue to prepare this project, I will personally update Enhanced Investor members on its progress. Any potential legislation forged in the funds initiative will become available for securitization very early on by members, but I will be certified by FINRA much sooner for access. Although this may take a year to become available on the market, I will always be here to field questions and advise on progress and potential.
The Enhanced Investor Weekly Macro
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The Enhanced Investor Weekly Macro
February 26, 2017
Additional Info For any newcomers who don’t know me, I’ve been contributing via the Enhanced Investor Weekly Macro Reports under #WatchList for over a year now. I began the education portion of this newsletter back in November due to the market action at the time. My in-depth knowledge of bubbles relative to political shifts and global economics, emerging markets, and monetary/fiscal policy needed to be shared, so I decided that it was simply not enough for beginners, or even intermediate traders because in order to have the ability to synthesize what’s truly happening - you need to be operating at the MBA/PhD level. As I’ve noted before, unfortunately, some PhD’s forget the basics. Whether that’s due to moral hazard, or plain and simple hubris, I can’t comment on that. Anyway, as I said a few weeks ago, it’s not fair for me to assume that all of you have what those at investment banks call “financial sophistication”, but that’s why we’re working together here at Enhanced Investor. Monitoring Wall Street and Washington helps us gain the upper edge. It’s why we do this. Anyway, I am more than happy to help, so if for some reason I don’t receive a tag in the #mainstockchat, or you don’t direct message me on Discord, please feel free to email here adamwood@fas.harvard.edu or you can tag me on StockTwits @ EILeadMacroAnalyst. Don’t fear a bubble - ever. We do not fear bubbles here at Enhanced Investor. Why? Because we’re armed with the strategic, tactical, and historical knowledge of every major bubble that has ever occurred. From the Tulip Mania of 1637 to the Housing Crisis of 2008 and the current market conditions - we’re prepared.
The Enhanced Investor Weekly Macro
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