Investment Commentary – August 1st, 2017

Market Indices as of Market Close August 1st, 2017
Dow 21,963 (11.13% YTD)
S&P 2,4765 (10.55% YTD)
NASDAQ 6,362 (18.20% YTD)
Gold $1,275 (9.41%)
OIL $49.24 (-13.60%)
US 10Y Treasury 2.253 (-22.35%)
Barclay Bond Aggregate (2.71% YTD)

August May Be When Stocks’ Low-Volatility Streak Finally Ends

Forget Mayweather vs. McGregor. The real summer showdown may happen in the U.S. equity market: a battle between a seemingly impervious stretch of calm and the historically chaotic month of August.

August has brought the biggest monthly jumps in the VIX on record, with the gauge averaging a 12 percent climb over its 31 days, according to data compiled by Bloomberg going back 20 years.
The seasonal pattern also shows up in daily market moves, with more one-day swings of 1 percent or more in the Standard & Poor’s 500 Index than in all but one other month since 1950, according to S&P Dow Jones data compiled by Sam Stovall. Only October sees more.

“Crazy stuff happens in August,” Michael Block, chief strategist at Rhino Trading Partners LLC in New York, wrote in a note to clients Tuesday. “Fair game, given all the choppiness and cross-currents and how successful punters have been selling volatility over and over again. That goes really well until it blows up yet again.”

U.S. auto sales fall in July as carmakers slash rental fleet sales

DETROIT (Reuters) – U.S. carmakers said on Tuesday they continued to slash low-margin sales to daily rental fleets in July as the overall pace of U.S. car and light truck sales fell for the fifth straight month.The annualized pace of U.S. car and light truck sales in July fell to 16.73 million vehicles, down from 17.8 million vehicles a year earlier, according to Auto data Corp, which tracks industry sales.

Investors sold shares in the Detroit Three automakers on Tuesday. General Motors Co (GM.N) fell about 3.5 percent and Ford Motor Co (F.N) slid about 2.5 percent.

Several major automakers, including GM, Ford, Fiat Chrysler Automobiles (FCHA.MI) (FCAU.N), Nissan Motor Co (7201.T) and Hyundai Motor Co(005380.KS) said they sharply reduced rental car sales in July, and they portrayed the decisions as putting profit ahead of sales volume.

Automakers have used low-margin sales to rental fleets to avoid factory shutdowns. With more flexible labor agreements, the Detroit automakers have shifted course. They are quicker to idle factories to reduce supply, and they are demanding higher prices, industry officials said. Fiat Chrysler has killed several models it once sold to fleets.

Around the Web:

Fed holds steady

As expected, the U.S. Federal Reserve on Wednesday voted unanimously to keep interest rates unchanged. However, the Fed said that it could begin to reduce the size of its balance sheet “relatively soon” by tapering its bond holdings.

Euro currency rally

The euro extended its recent rally, weakening the value of the U.S. dollar and weighing on European stocks. The strengthening of the euro has made Europe’s exports less competitive as they become relatively more expensive for overseas buyers.

Crude awakening

Crude oil prices rallied for five days in a row, rising to the highest level in nearly two months and approaching $50 a barrel. Prices were lifted by indications that excess oil supplies have recently eased.

On Tap for the rest of the week:
Wednesday: ADP National Employment Report, ADP
Friday: Monthly jobs and unemployment, U.S. Bureau of Labor Statistics

Leaders this past week included Utilities, Basic materials and financials. Laggards included Conglomerates and Healthcare.

Boeing Gets Even Bigger
Boeing purchased its archrival McDonnell-Douglas and became the nation’s leading commercial aircraft manufacturer; an unlucky series of events caused a downturn, however.

The views presented are not intended to be relied on as a forecast, research or investment advice and are the opinions of the sources cited and are subject to change based on subsequent developments. They are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investments.