Interest Rate Hike?

U.S. equity markets fell last week as investors became increasingly concerned that interest rates will soon rise. The U.S. employment report, released Friday, showed positive improvement in employment and wages.  The official unemployment rate held steady at a seven-year low of 5.3% which many investors believe sets the stage for a September interest rate hike.  The S&P 500® Index fell 1.2% upon the news.  As of Friday the index is 2.5% below its record close set on May 21, 2015.   Additionally, oil prices fell 6.9% last week, closing at $43.87 per barrel.  Earnings season continued and investors were disappointed by poor reports, specifically within media companies.  Looking ahead to this week, investors will pay close attention to Corporate America as earnings season enters its fifth week and hope for positive news.

The S&P 500® was down 1.2% for the week.  The top-performing sectors in the S&P 500® Index included Utilities (0.9%) and Financials (-0.1%), while bottom-performing sectors included Consumer Discretionary (-2.4%) and Energy (-3.5%). In the fixed-income market, the 10-year Treasury yield was even during the week, ending at 2.2%.

We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.

Expectations to Outperform

Danaher Corp. (DHR), headquartered in Washington, D.C., is a designer, manufacturer and marketer of medical, industrial, professional and consumer products. DHR was founded in 1969 and was previously known as DMG, Inc., but later took the Danaher name in 1984. The company produces a broad range of products including electronic calibration equipment, retail/commercial petroleum products such as underground storage tank leak detection systems, high-precision optical systems for the analysis of microstructures and aerospace defense articles, among others. DHR’s primary product lines are sold in North America, Europe and Asia.

DHR has a long history of delivering consistent earnings growth through continual development of its own businesses and by acquiring businesses that are fast growing and have high returns. Over the years, the company’s management team has demonstrated skill and discipline in selecting and integrating its many purchases. A more recent purchase included an expansion in the water treatment industry. This industry has strong growth potential and now DHR is a key beneficiary of this trend. Economic uncertainties have depressed DHR’s multiples, and as a result we have been presented with this buying opportunity. In the long-term, we expect DHR to outperform its peers and the market.