The Week Ahead 05/14/2018

The U. S. Navy announced on May 11th that it intends to relaunch the 2nd Fleet.  In 2011 the Obama administration grounded the fleet for cost-cutting measures, and at that time the relationship with Russia was a bit nicer.

According to the Navy Office of Information, “More than 90,000 Sailors and Marines operate and train within 2nd Fleet’s area of responsibility. 2nd Fleet’s three focus areas are: conducting safe and effective fleet operations to achieve the mission, providing ready maritime forces for global assignment, and teaming with allies and partners in execution of the Maritime Strategy.”

Another statement from the Navy Office of Information: “Second Fleet will exercise operational and administrative authorities over assigned ships, aircraft and landing forces on the East Coast and northern Atlantic Ocean. Additionally, it will plan and conduct maritime, joint and combined operations and will train, certify and provide maritime forces to respond to global contingencies. Commander, 2nd Fleet will report to USFF.”

“Our National Defense Strategy makes clear that we’re back in an era of great power competition as the security environment continues to grow more challenging and complex,” said Adm. John Richardson, at a recent change of command ceremony. “That’s why today, we’re standing up Second Fleet to address these changes, particularly in the north Atlantic.”

When I read this, a red flag went up and peaked my interest.  Why?  Is it Russia, China, Iran, or North Korea. It could be anyone, but the point is that fleets are not instated just to get back on the water.  I am not saying this is a prelude to war, but it warrants attention.

Now on to the week.

What to Watch for this Week

We have a pretty normal economic calendar this week.  Housing data will be a key data point along with retail sales and industrial production.   After last weeks impressive run-up, I am wondering what sectors are benefiting from our current political decisions.  2018-05-13_11-38-59

Earnings season is winding down.  455 companies of the SP 500 have reported.  Lipper Alpha indicates that 78.2% have reported above analysts expectations. 75.8% have reported revenues above analysts expectations, above the long-term average of 60%.  The forward four-quarter (2Q18 – 1Q19) P/E ratio for the S&P 500 is 16.7. Click here for the full report.

I have put this chart together to show the iShares sector ETF’s and which ones are the strongest over the last three months.  We are a little over three months from our drop in February.  Has sufficient time passed, and people are now getting back into the market?  If so, the Energy and Technology sectors are outperforming.


Global Spotlight

Jettisoning the JCPOA. Following U.S. President Donald Trump’s dramatic announcement to withdraw from the Joint Comprehensive Plan of Action and impose the “highest level” of sanctions against Iran in the coming months, Iranian Foreign Minister Mohammad Javad Zarif headed to Beijing, Moscow and Brussels on May 12 to try and get firm guarantees that China, Russia and the Europeans will stick to the deal.

Revenge Is a Dish Best Served Cold. Israel’s escalation of attacks on Iranian positions in Syria further complicates Iran’s calculus. Iran has a need to deter further Israeli attacks without expanding the conflict into something that would draw in Russia and the United States.

Get Ready for a Euroskeptic Italy. Italy’s anti-establishment Five Star Movement and right-wing League parties are nearing a deal to form a government.

Economic Calendar

Here is a list of the U.S. economic events happenning this week.


Last Weeks Numbers

Review Last weeks numbers here.