BCM Peak Insights: For the Month of November 2019

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November 2019

This November, we're thankful for our clients, our coworkers, and the high-speed WiFi connection that helps us keep up with market news! Take a look below for some of the stories we've been following closely this month.

As always, don't forget to check out some of our most popular posts from the BCM Blog.   

Market News

Congress Passes Hong Kong Rights Bill, Complicating Trade Negotiations¹

Congress passed the Hong Kong Human Rights and Democracy Act in late November, supporting anti-government protesters amid growing tension with Chinese authorities and ongoing trade negotiations between the U.S. and China. An additional bill limiting the export of crowd-control munitions to Hong Kong also passed, and both now await President Trump's signature or veto. The Chinese foreign ministry has since warned of "strong countermeasures" against any U.S. intervention, threatening the already-tenuous "phase one" trade deal. Read more on the situation here.

Amazon Launches Appeal Over Microsoft's $10 Billion DoD Contract²

Amazon is alleging the government showed "unmistakable bias" in awarding a $10 billion cloud computing-contract—the largest in U.S. history—to longstanding rival Microsoft. Known as JEDI, or Joint Enterprise Defense Infrastructure, the contract was awarded to Microsoft on October 25 after months of delays and controversy. Amazon Web Service (AWS) is the company's leading profit driver and is already employed by the CIA, so the loss came as a surprise to the web-giant, which cited President Trump's criticism of Jeff Bezos in its statement. Read more here.

U.S. Housing Starts Rebounded in October as Building Permits Hit 12+ Year High³

Low interest rates seem to be benefiting the housing market, where housing starts rose a solid 3.8% in October—an 8.5% YoY gain—and permits for future construction hit their highest point since the pre-crisis era. October marked the fifth straight month of gains for single-family construction and saw some signs of strength from the often-volatile multi-family sector. October also showed a rise in home completions, which is good news for buyers who have seen persistently low inventory contribute to soaring costs. Click here to read more!

BCM Insights from the Bird's Eye View Blog

Fireside Charts: Mini-Cycles, Manufacturing, and Mounting Debt

The U.S. Leading Economic Index dropped for the third straight month in October, driven largely by trade war uncertainty. Stay tuned to see if we're on the edge of another rebound or already in the midst of a more sustained downturn. In the meantime, we're seeing some mixed signals from the Philly Fed on manufacturing, and more evidence is piling up that hedge funds maybe aren't all they're cracked up to be. And the state of American farming might not be either—just how much has the government intervened in the past decade? See the charts here!

Fireside Charts: 'De-Worsifying' Equities, U.S. Dividends Fail to Measure Up, and Are Junk Bond ETFs Turning to Junk?

Diversification has long been touted as a cornerstone of successful investing, but do you know just how in-sync U.S. and international equities have become in the past 20 years? Here's a hint: if it was a letter grade, we wouldn't "B" dissatisfied. We are a little dissatisfied with how U.S. dividends stack up against those in international and emerging markets though. And are junk bond ETFs the next "big short?" Some investors seem to think so, but such heavy shorting has us wondering about the quality of the funds' holdings. Click here to see the charts!

Fireside Charts: GDP, Earnings, Jobs, and Other Measures Exceeding Expectations

Despite cutting rates again in November, the Fed has indicated they may be pressing "pause" on rate adjustments going forward. Could the surprise out-performance from GDP (0.3% above expectations) and the October job's report (50k+ above expectations!) indicate they may be on the right track? And could commodities soon join GDP, jobs, and Japanese industrial production on the pleasant surprise bandwagon? They've been on the decline since 2011 as equities have surged, but they look to be testing the trendline. See the charts here!

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Sources:

¹Cowan, Richard & Zengerle, Patricia. “U.S House Passes Hong Kong Rights Bills, Trump Expected to Sign."

USNews.com, U.S. News, 20 November 2019.

²Bowman, Tom. "Amazon Appeals Pentagon's Choice of Microsoft for $10 Billion Cloud Contract."

NPR.com, NPR, 14 November 2019.

³"U.S. housing starts rebound; building permits at highest level in over 12 years."

CNBC.com, CNBC, 19 November 2019.

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Congress Passes Hong Kong Rights Bill, Complicating Trade Negotiations1