Morning Market Thoughts

by DAN Good morning. This is a short week, with the market closed on Thursday in observance of the Thanksgiving holiday, and open only one half of the day on Friday. The futures are pretty flat this morning, which seems typical for the market these days.

There’s not a lot to say this morning because it’s a relatively slow news day. We’ve got a few earnings reports due this week, though about 95% of all of the companies in the S&P have already reported. Urgan Outfitters (URBN) reports this evening, and Lowe’s (LOW), Dollar Tree (DLTR), HP (HPW), Gamestop (GME) and Salesforce (CRM) report tomorrow, and Deere (DE) pulls up the trailer on Wednesday.

LOW and DE actually look like that could move on earnings. Both look somewhat like coiled springs, though it is always a risk to hold a stock over earnings. CRM has been in a very solid uptrend with few rest stops. So be careful with this. The bulls may have already anticipated strong earnings…though we won’t know that until the report comes in tomorrow.

One matter over in Europe that bears watching.

Developments in Germany (and hence, the EU) are interesting. I am not well versed in foreign politics, finding it sufficiently difficult (and distasteful) to understand our politics over here. But I do read, and I do pay attention to what’s happening in Europe because, in this global economy, it’s not all about us any longer.

As you probably know, Angela Merkel recently won re-election as Chancellor of Germany, and is also the senior leader of the G7. So she’s kind of a big deal over in Europe, which means she’s a big deal over here. As newly elected Chancellor, she is charged with putting together a coalition government. And therein lies the problem. Angie is an avowed globalist. This is not an opinion, it’s a known fact. She’s a big fan of the European Union (EU) and probably hasn’t slept a wink since the Brexit vote last year. On that front, opinions vary. Some folks over in Germany seem to be more interested in self-governance. That’s where the Free Democratic Party (FDP) comes into play. The FDP is about as far away from Merkel as you could be. Unlike Merkel, the FDP’s focus is on individual freedoms and away from excessive, intrusive governmental regulation. Its motto is “As much state as necessary, as little state as possible.” They want a balance budget, deregulation, privatization, reduction of governmental subsidies and a reduction in government debt. They also want a flat tax.

As I understand it, none of these things move the needle for Merkel.

Merkel allowed 1.2 million migrants to enter the country in 2015-16, and would love to have more. If you remember, her rallying cry in defiance of those who actually wanted to limit the unrestrained amount of refugees coming into Germany was “we can do it.” Last year she dropped that slogan, though declined to adopt a newer, more accurate slogan, “Um, no we can’t.”

So there are a LOT of issues over there that definitely impact the direction of Germany, and hence the direction of the EU. And the FDP, along with a few other minority parties, aren’t really playing ball with Angie, so she’ll probably have to rule (er, I mean “govern”) with a minority government, or deal with a brand new election.

Either of these outcomes could roil the European markets, so keep an eye on them. Any issues over in the EU should be interesting, though I don’t expect them to have much impact on our domestic markets.

Anyway, I thought I’d just pass along this little tidbit this morning. It’s easy for us to remain very insular in our thinking and focus. But it’s a big world out there, and it’s important to have an understanding and appreciation for economics and governing policies in various parts of the globe.

Have a great day!

–Dan

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