Top News Before the Market Opens
Market Opens If you have followed my U.S. stock market analysis through the years, you would know I have, correctly, been steadfastly bullish. In fact, I was one of the few who expected equities to rocket higher after Donald Trump won the election in November.
And now we are approaching the 2,500-point target in the S&P 500 IndexSPX, +0.29% that we had expected to hit. However, just because the market has rallied strongly after the election does not mean we expect it to continue into the next election season of 2018. Let me explain why that is so important.
“It’s the economy, stupid”
James Carville, one of President Clinton’s campaign strategists, coined a term years ago that has been considered the most important factor for an incumbent president being able to win re-election: “It’s the economy, stupid.”
But, based on a 2012 paper written by Prechter, Goel, Parker and Lampert, which analyzed presidential elections from 1789-2008, they determined that factors such as gross domestic product, unemployment, inflation and so on are not significant predictors of the outcome of an incumbent’s re-election bid. Rather, it is the direction of the stock market in the one to three years before the re-election bid, which is the best predictor of success for the incumbent. Here they write:
- AMD revenue climbs on robust demand for graphics chips. Shares of AMD are soaring in the pre-market action after the company raised its outlook and reported earnings that topped expectations. Also, AMD raised its full-year expectations, betting on robust demand from cryptocurrency miners and gamers for its graphics chips and its new Ryzen processors for PCs. AMD said it now expects annual revenue to increase by “a mid to high-teens percentage”. Read more here.
- Apple is at risk of falling out of the top 5 smartphone vendors in China. According to research firm Canalys, Apple has fallen to 5th place in the Chinese smartphone market. Huawei tops smartphone sales in the country with 23M units shipped last quarter. Oppo came in second with 21M followed by Vivo (16M) and Xiamoi (15M). The latter took Apple’s previous spot on the list, but Canalys doesn’t provide Apple’s shipment numbers. The top 5 brands in the country account for around 75% of the shipments. Read more here.
- iRobot soars 21% on report of SoftBank stake. According to Bloomberg, SoftBank has built a stake of just under 5% in iRobot, as the Japanese company builds its holdings in robotics firms. SoftBank, which has more than $93B in commitments so far for its technology-focused Vision Fund, has been snapping up robotics firms this year. Read more here.
- Trump: Cohn top contender for Fed chair. The president tells the WSJ that his chief economic advisor Gary Cohn is a top candidate for the role of Fed chairman. The current Fed chief Janet Yellen, he says, is doing a good job and remains in the running for a 2nd four-year term. Yellen’s current term expires in February. Read more here.
- Obamacare repeal fails in Senate. A plan to repeal and replace Obamacare that Senate Republicans have been working on for months failed to get the 60 votes needed for approval Tuesday night. The vote was 43 in favor and 57 against. 9 Republicans voted against the measure. It was the first of many expected votes this week on repealing or replacing elements of President Barack Obama’s signature healthcare law. Read more here.
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