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Well it had to happen eventually - a market correction! Markets encountered their first real correction in 2019 after the U.S. announced it would increase tariffs from 10% to 25% on $200 billion of Chinese imports. Markets had been expecting a resolution to the ongoing trade conflict given the generally positive news flow over the past 5 months.

That said, the S&P 500 Index is just 3% off its all-time closing highs despite headlines noting this is the worst week of returns since December 2018. While this kind of volatility can be uncomfortable, investors need to focus on long-term fundamentals (which remain positive) rather than daily headlines. Corporate earnings are ultimately the long-term determinant of market returns, and U.S. companies have posted better-than-feared results this quarter thus far. U.S. economic data is supportive and so is the Federal Reserve.

News flow concerning trade will continue to move markets but fortunately China has invited U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin to Beijing to continue trade negotiations, according to White House economic adviser Larry Kudlow. At time of writing, China hasn’t yet responded with retaliatory measures, unlike in past rounds of escalation when it raised duties on U.S. goods. Also, China has more limited tariff options, since it imports far fewer products from the U.S. Suspect some type of deal will be done-eventually.

Weekly returns to 10 May 2019
(AUD 5-day return far right- hand column)

Source: Bloomberg


Notable company news

Corporate earnings update

A large number of U.S-listed companies reported quarterly earnings last week. A summary for companies we've included in our thematic share portfolios (Vues) can be found here.

Two takeovers in one week!

Zayo (NYSE: ZAYO) to be acquired for US$14.3B

On 8 May 2091 it was announced that Zayo is to be acquired for$35/share by affiliates of global investment firms EQT and Digital Colony. The offer represents a 32% premium on the volume-weighted price average of the past six months. The company will become private but maintain its team and Boulder, Colorado headquarters. The transaction is valued at $14.3B including the assumption of $5.9B of Zayo's net debt. Zayo expects the sale to close in H1 2020.

Zayo is held in Macrovue’s 5G thematic share portfolio.

Buckeye Partners LP (NYSE: BPL) takeover by IFM Global

Buckeye Partners stock jumped 28% to $41.44 in premarket trading on Friday 10/05/19 after agreeing to be bought by IFM Global Infrastructure Fund for $41.50 per common unit in cash. Deal represents a 27.5% premium to Buckeye's closing unit price on 9 May 2019. Deal has a $10.3B enterprise value and $6.5B equity value and adds to IFM's midstream energy infrastructure portfolio. Expected to close in Q4 2019.

BPL is held in Macrovue’s International High Dividend thematic portfolio.


  • 10-Year Treasury yield: -9 basis points to 2.47%
  • Gold: +0.4% to US$1,286.05
  • WTI crude oil: -0.5% to US$61.66
  • AUD/USD: -0.32% to 69.88

The week ahead


The calendar is a big one. Important data points are retail sales and industrial production. Housing starts and building permits are important indicators as is the Michigan consumer sentiment indicator in order to measure consumer spending potential.

Source: briefing.com

Chart of the week

S&P 500 Pullbacks

As shown in the LPL Chart of the Day, the S&P 500’s largest pullback this year has been unusually small relative to previous years. Since 1970, the S&P 500 has made it through the first five months of the year without at least a 2.5% pullback only once — in 1995.

On average, the S&P 500 has endured an 8.5% pullback from January to May each year. This year, stocks haven’t come close to that. The largest S&P 500 pullback this year has been a one-day slide of 2.48%.


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