Weekly Investor – March 26, 2018
Stocks Sink on Trade War Fears
The S&P 500® slid nearly 6% last week and closed at its lowest level since February 8, bringing the YTD return to -2.75%. Most of the negative movement can be credited to increasing odds of a global trade war. President Trump announced a plan to implement tariffs on nearly $60B in Chinese goods as punishment for China’s lax enforcement of U.S. intellectual property rights, and China retaliated by announcing its own possible tariffs on more than 128 U.S. imports. If this trade war intensifies, it could have a significant impact on global financial markets.
Europe was not immune to trade tariffs, either. The EU proposed a 3% protectionist revenue tax on large technology firms, helping drive down European markets as the STOXX 600 Index® returned -3% last week. Facebook Inc. returned -13.9%, in part because of the EU tax but also because of concerns over user data. CEO Mark Zuckerberg has apologized several ways for the company’s “breach of trust” and vowed a change.
Other poor performers last week were Oracle Corp. and Alphabet Inc., Google’s parent. Alphabet posted a -10.5% return and the EU’s protectionist revenue tax is mostly to blame. But not all stocks were in the negative. Several energy names were in the green last week, including Anadarko Petroleum Corp. and ConocoPhillips, fueled by higher oil prices. Overall, the economic backdrop remains constructive for equities, with positive GDP and employment trends.
The S&P 500® Index was down 6.0% for the week. Its top-performing sectors included Energy (-0.9%) and Utilities (-2.5%), while bottom-performing sectors included Financials (-7.2%) and Basic Materials (-7.9%). In the fixed-income market, the 10-year Treasury yield was down during the week, ending at 2.8%.
We continue to seek companies that reflect our Change-Based InvestingSM approach.
Changes Underway
Boston Scientific Corporation (BSX) develops, manufactures and markets medical devices used in a broad range of interventional medical specialties.
BSX has undergone a multi-year turnaround effort that has been driven by several new product introductions yielding positive results for the company. We believe these encouraging changes have put BSX in a position to be a leading growth company within the medical device space. With its potential for accelerating sales growth and improving profitability, we feel BSX offers our clients favorable odds.
Top 10 Equity Holdings
Large Cap Growth
| Alphabet Inc. (Google, Inc.) | 7.2% |
| Red Hat Inc. | 5.3% |
| Marvell Technology Group | 4.7% |
| Baxter International Inc. | 4.6% |
| Masco Corporation | 4.1% |
| JP Morgan & Chase Co. | 4.1% |
| Fortive Corporation | 4.1% |
| Mastercard Inc. | 3.9% |
| Cognizant Technology | 3.7% |
| Lincoln National | 3.3% |
Small Cap Core
| Wintrust Financial | 2.9% |
| Fortinet Inc. | 2.8% |
| Mastec Inc. | 2.3% |
| First Internet Bancorp | 2.3% |
| Pacific Premier Bancorp | 2.3% |
Dividend Select
| JP Morgan Chase & Co. | 5.7% |
| Marvell Technology Group | 4.0% |
| Principal Financial Group | 3.8% |
| Occidental Petroleum | 3.8% |
| ConocoPhillips | 3.7% |
This newsletter presents selected recommendations from portfolio managers of Argent Capital Management LLC, a registered investment advisor. Opinions reflect the portfolio manager’s judgment on the date above and are subject to change. A list of stocks recommended by Argent is available upon request. You should not assume that these recommendations are or will be profitable. In the course of it’s business, Argent’s client accounts may be buying and selling these stocks.
