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World Reality...Published on January 14, 2017

7-7 Market Highlights (1/8 - 1/14/2017)

“Recognize the reality of what we deal with…” Mad Dog Mattis, Secretary of Defense designee. The reality is that our world is in chaotic transition:  Rising income and economic disparity pose as the most critical risk and so does the rise of populism, and uncertain political future around the world. Drastic change in technology has accelerated problems in geopolitical stability, job security and even social relationships.  Extreme weather events, climate change and water crises are the reality leading to ever uncertain future.  And Tillerson, Secretary of State select, says China should be denied access to the South China Sea it claims illegally. There will be Chinese response, I am certain.

Reality is that what comes out of mouth of Donald Trump and his designates impact the market. Good or bad, like it or not, it is the reality as we witness Trumps comments on pharma and how market nose dive momentarily Wednesday. Trump is forcing rapid repealing of the Obamacare. Result may not be any more pleasing but it is coming. Impacting market and creating job? Well Trump and Jack Ma of Alibaba met to create global business opportunity, and Ma stated that BABA will create 1 million jobs in USA. We’ll see. It’s the reality of coming administration.

The House voted 227-198 to instruct committees to draft legislation by a target date of Jan. 27 that would repeal the 2010 Affordable Health Care Act. No Democrats supported the initiative. The Senate voted early Thursday to repeal Obamacare, a top goal of congressional Republicans and President-elect Donald Trump.

Well, at least there is a good development in business: flexible jobs. Reality is that prospective employees and employers will benefit and create more pool of employees in business. Some say its win-win for both employees and companies…

Here are the highlights of the second week of 2017:  

1.   World Order is Under the Biggest Attack since World War II.         "Be polite, be professional, but have a plan to kill everybody you meet," Mad Dog Mattis was once quoted as telling Marines in Iraq.  "I think it's under the biggest attack since World War II, sir, and that's from Russia, from terrorist groups and with what China is doing in the South China Sea," Mattis said in answer to a question from Sen. John McCain.  Mattis emphasized the importance of recognizing "the reality of what we deal with" in regards to Russia and its president, who the retired general says is trying to "break" the North Atlantic Treaty Organization alliance. He said that the U.S. must take "integrated steps" involving diplomatic, economic and military actions to "defend ourselves." But international alliances are essential to American success, Mattis said in his opening remarks. Reality is not pretty at all…  Retired Marine Corps general James Mattis, 66, testifies before the Senate Armed Services Committee and is widely expected to be confirmed.  "He is without a doubt one of the finest military officers of his generation and an extraordinary leader who inspires a rare and special admiration of his troops," McCain said in a December statement.  The retired general has served in the Vietnam War, the first Gulf War, Iraq and Afghanistan. He earned his nickname "Mad Dog" for his blunt, tough-talking manner.

2.  China be Denied Access to South China Sea Islands.     Rex Tillerson, former ExxonMobil CEO, U.S. President-elect Donald Trump's nominee for Secretary of State, testifies during his confirmation hearing before Senate Foreign Relations Committee January 11, 2017 on Capitol Hill in Washington, DC. He called China's South China Sea island-building and declaration of an air defense zone in waters of the East China Sea it contests with Japan "illegal actions."  "They're taking territory or control, or declaring control of territories that are not rightfully China's."  Tillerson may have set a course for a potentially serious confrontation with Beijing on Wednesday, saying China should be denied access to islands it has built in the contested South China Sea.  Comments expected to enrage Beijing, Tillerson told his confirmation hearing before the U.S. Senate Foreign Relations Committee that China's building of islands and putting military assets on those islands was "akin to Russia's taking Crimea" from Ukraine. Tillerson said he considered China's South China Sea activity "extremely worrisome" and that it would be a threat to the "entire global economy" if Beijing were able to dictate access to the waterway, which is of strategic military importance and a major trade route.  He accused China of failing to live up to global agreements on trade and intellectual property, echoing past remarks by Trump, who has threatened to impose high, retaliatory tariffs on China. But Tillerson also stressed the "deeply intertwined" nature of the world's two biggest economies.

3.   Trump the Driving Influence in the Market?    "So for all the uncertainty and disorganization going on people are talking about with the Trump incoming administration, the market seems to like it," analyst said. But investors are "absolutely" going to have to pay attention to what President-elect Donald Trump says on Twitter or during his occasional press conferences because there is still headline risk in the market, trader Keith Bliss told CNBC on Wednesday. That also includes what Trump's appointees say, he added. "It's going to be the driving influence in the market," the senior vice president at Cuttone & Company said in an interview.  On Wednesday, health care stocks got hammered after Trump said in a news conference that the drug industry is "getting away with murder." The market has been rallying since Trump won the election in November. In fact, the biggest pullback in the S&P 500 closing has been 1.45%, Bepoke Investment Group's co-founder Paul Hickey pointed out. No other newly elected president since 1928 has seen that consistent and steady a rise postelection, Watch. Be vigilant. And prepare to act on the market influencing comments coming from new administration.    

4.   Senate Approves First Step to Repealing Obamacare.   The House voted 227-198 to instruct committees to draft legislation by a target date of Jan. 27 that would repeal the 2010 Affordable Health Care Act. No Democrats supported the initiative. The Senate voted early Thursday to repeal Obamacare, a top goal of congressional Republicans and President-elect Donald Trump. Senators voted 51-48 to approve a budget resolution that Republicans will use as a vehicle to speed through repeal of the Affordable Care Act. Republicans said the 2010 health care law is broken and must be repealed and replaced with something better although just what that replacement plan will look like has not yet been revealed by congressional leaders. Critics of the law cite sky-rocketing premiums, high deductibles and fewer health care choices for patients as insurers pull out of the program. The American people to discover the truth about Obamacare. Too many have been personally hurt by this law. While Republicans are eager to repeal the Affordable Care Act, they have acknowledged that it could cause serious problems for Americans if the law is scrapped without a replacement plan ready to go. 

5.   Global Risks for 2017.         The World Economic Forum's (WEF) flagship annual report surveyed 750 experts to identify the most significant global concerns. Here are the top five:

1)     Economy: Rising income and economic disparity ranked first among experts as the most critical risk which could shape global developments over the next decade. 

2)     Society:  Brexit, President-elect Donald Trump's victory and the rise of populism are all geopolitical risks.

3)     Technology: Drastic change in technology was said to have accelerated problems in geopolitical stability, job security and even social relationships.

4)     Geopolitics:  GRPS experts alarms step back from international commitments in 2016. The Paris Climate Change pact had come under fire by Donald Trump.

5)     Environment:  Extreme weather events, climate change and water crises have consistently featured among the top-ranked global risks over the past decade.

6.     Alibaba Job Boom: Jack Ma to Create 1 million US Jobs over 5 years.             EMarketer estimates that there will be more than $150 billion in cross-border e-commerce sales in China by 2020. And "Alibaba will create 1 million U.S. jobs by enabling 1 million American small businesses and farmers to sell American goods to China and Asian consumers on the Alibaba platform," the company said in a statement.  President-elect Donald Trump said he had a "great meeting" with Alibaba (BABA) executive chairman Jack Ma on Monday, when they discussed 1 million new U.S. jobs. Ma said that Alibaba's expansion would focus on products like garments, wine and fruits, with a special focus on trade between the American Midwest and southeast Asia. "We're focused on small business," Ma told reporters.  Still, Alibaba has a complicated relationship with U.S. regulators.  The company faced an SEC investigation about its accounting methods last year, and its property, and counterfeit goods. In any case it was good photo ops for Ma and Trump. We’ll see if jobs reality in coming years…

7.     More Jobs are Becoming ‘Flexible’.          Flexibility benefits the employee, but also the employer. The most common flexible arrangements include telecommuting, part-time, and flexible hours where an employee can set some or all of their hours. And it may be a "win-win" for both the employer and the employee. Job candidates, especially if they are in a rural town with less opportunity, but now companies have a wider pool of candidates to find their perfect hire.  Slowly but surely, the traditional 9am to 5pm job and the long commute it sometimes entails is becoming a thing of the past. More companies are offering

work perks like flexible schedules and the ability to work from home. It's a benefit more companies are starting to offer to keep employees happy. According to the Harris Poll survey on behalf of Ernst and Young found the top priorities for job seekers, after competitive pay and benefits, were flexibility and not having to work excessive overtime. Today, 80% of all US companies now offer flexible work arrangements, according to one survey.  Meanwhile, telecommuting specifically has grown 103% in the last ten years.

Again, these are my researched and analytical thoughts on the highlights of the week. Perhaps you should take a closer look at them, do additional research and analysis, if these are interest to you. Always, you decide with your own final analysis and position. Best 2017 Wishes.

As always, I welcome your thoughtful comments.

~ S. Vincent Shin

www.linkedin.com/in/vshin

Image credits to:  vShin, Getty image, AP Photo, Reuters, CNBC, and special thanks to Image & Visual Consultant @U.Y.