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Hurricanes, Earthquakes and Record-High Markets

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Wednesday, September 20, 2017

While new hurricane concerns surround the events in Puerto Rico and elsewhere, two earthquakes, registering 8.1 and 7.1 — major, by any measure — have hit Mexico in the last few days. Earthquakes tend to reverberate over time, resulting in after-shocks, and those we have seen as well. Mexico has nowhere near the value per square mile the U.S. has, but even still, the loss of life and industry has got to be taking its its toll in the country, which is home to plenty of U.S. companies which relocated there in order to reduce costs and pass the savings along to shareholders.

Hurricane Maria has struck a direct hit on the American property of Puerto Rico, and damages will be days away from being tallied. Clearly, businesses here will have been affected on someone’s balance sheet next month; we’ve already seen negative results in initial jobless claims last week that tie directly to Hurricanes Harvey and Irma over the past month. This is not taking into account the resources and industries of transport affected by these natural disasters that will come along in economic metrics as time goes on. Something to think about as stock markets continue their climbs into the stratosphere.

Will the Fed have anything to say about any of this? Today we hear from Fed Chair Janet Yellen regarding interest rate policy (a raise at this stage would be BIG news) and the unwinding of the gigantic $4.5 trillion balance sheet. Former Fed Chair Ben Bernanke ordered a buyback system in order to backstop U.S. currency in helping the nation dig out of the Great Recession, which happened almost exactly 9 years ago. All signs are that the U.S. economy has fully recovered, and so we expect that ratcheting down of backstopping to commence with today’s press conference with Ms. Yellen today.

For now, we continue to see record highs in the markets; clearly investors see little in the way of continued growth across most industries. But we would caution that these natural disasters will have a negative affect at some point in the near future, and we would expect these to manifest in economic data released monthly over time. Whether the market decides to digest these items without difficulty remains to be seen.

Best Buy (BBY - Free Report) shares have fallen precipitously following its Q2 2018 earnings results after the bell Monday. An earnings estimate miss, combined with cuts to the company’s full-year outlook, has resulted in a 15% drop in BBY shares. Yet another retailer feeling the pain in 2017.

Yet Alnylam Pharma (ALNY - Free Report) has rocketed up nearly 30% in today’s pre-market on positive results from its favorable phase 3 study on treatment for a hereditary cardiomyopathy called patisiran. A new drug application (NRA) is expected on the treatment before 2017 ends.

Mark Vickery
Senior Editor

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