Weekly Market Commentary May 31, 2017

May 31st, 2017 by Anchor Bay Capital's Investment Team

Last Week’s Market:

Last week marked the 100th trading day for the year and so far stocks have shown strong growth and very little volatility over this period.  The S&P 500 and the Nasdaq each closed at record highs on Friday.

Overall, the markets resisted a plethora of negative news from politics to the Manchester bombing to a few disappointing economic reports.  This shows that investors are focused on the longer term momentum of global production and earnings growth.

In summary, last week was a strong week in a strong year so far for the stock market.  While we appreciate these periods of low volatility it is important to remain focused on fundamentals as questions remain regarding what changes in economic policy we will see this year and what the results of those changes will be.

Our View:


As the NBA Finals kick off tomorrow with what should be a competitive series, we are reminded of an old sports adage: “Don’t let the highs get you too high and don’t let the lows get you too low.”  We’re not sure where this originally came from, but the sentiment is known well by champion athletes.  As winning a championship requires one to keep their emotions in check, so does investing.  It remains to be seen how stocks will fare in the weeks ahead as U.S. economic data has been disappointing for a while. When equity markets have taken brief dips, the smart investors have shrugged off bad news and quickly stepped in and started buying.  They haven’t let up too much over the past week.  In the short term, we are looking for a somewhat “sideways market” with no real downside momentum unless there is some “earth shaking” headline news. Clearly, traders will be watching for corporate and political developments, while also keeping an eye on the Fed this June and September.

Portfolio Insight:


NFLX – Since writing a call on Netflix.com on May 24th*, the stock is up just under 4%. Continued speculation of a possible buyout from companies like Apple and Disney are a main contributor for this gain. This capital appreciation coupled with the original premium has combined for a great return in a short period of time. Currently, we see continued growth in NFLX and intend to hold on to the stock long term.

*Options (calls and puts) can only be written in blocks of 100 shares, so the NFLX call only pertains to individuals who own 100 shares or more. However, the impressive capital appreciation will be captured by any individual owning shares of the stock.