8/25/17 – Stocks Rebound, but Risks Remain

Stocks reversed a two week losing streak, but risks remain. For the 10th consecutive week, investors have pulled money out of stock mutual funds. Over that period, $30 billion has left the equity markets through mutual fund redemptions. With so much passive money in the market these days, equity flows can be a good predictor for future price performance. Mutual fund flows can indicate how retail investors are feeling about the market. Additionally, as funds are forced to carry out large sell orders these fund flows can move the market. Given that we are close to all-time highs with continued concerns around tax reform and North Korea, I’m comfortable holding higher-than-average cash balances in portfolios. For the week, the Dow increased 0.6% while the S&P 500 increased 0.7%.

Heading into fall means football. A staple for bars and restaurants during football season is chicken wings. Consumer demand for wings continues to grow and prices are starting to follow. The wholesale price of chicken wings has increased 20% this year and frozen storage stocks are a third lower than at the same time last year. The driver seems to be increased consumer demand. If you’re in restaurants and bars in the coming weeks, expect to see higher prices on wings and specials on boneless wings. Boneless wings are made from breast meat and are less expensive for restaurants to buy. Wings were once an afterthought and restaurants started pushing them as appetizer specials. Well, a market was successfully created and prices are responding accordingly. Read More

Oil declined again this week, dropping 1.6% to close at $47.83/barrel. Hurricane Harvey put some pressure on oil later in the week as any damage to refineries could increase global supply as ships lose the ability to unload oil to some gulf coast refineries. The yield on the 10-yr Treasury moved lower, closing at 2.17% from 2.19% last week. The average rate on a 30-yr fixed rate moved to the lowest level of 2017, 3.86% from 3.89% last week.

Close Weekly YTD
Dow Jones 21,813.67 0.6% 10.4%
S&P 500 2,443.05 0.7% 9.1%
Oil 47.83 (1.6%) (11.2%)
10-yr Treasury (∆ in bps) 2.17 (2) (27)

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