Wyatt Research Week in Review: Aug. 30-Sept. 5

It was another up-and-down week for the markets, though it was nothing compared to last week’s epic seesaw.
On Tuesday, the Dow Jones Industrial Average lost 469.68 points, or 2.8%. The Nasdaq Composite Index sank 140.41 points, or 2.9%. The S&P 500 plunged 58.33 points, or 3%.
Wednesday’s tally: Dow up 1.8%, Nasdaq up 2.5%, S&P 500 up 1.8%.
The Tuesday dip once again had a Chinese connection, although this time with a South Korean twist. China’s manufacturing sector posted its worst monthly contraction in three years in August, while South Korean exports declined 14.7% for the month – due in large part to weak Chinese demand.
Stocks dipped in Friday trading after the U.S. Bureau of Labor Statistics reported that 173,000 jobs were added in August. Although the figure was below economists’ prediction of 220,000 nonfarm payrolls, the unemployment rate fell from 5.3% to 5.1% – the lowest level since 2008.
Some pundits claimed that the jobs report supports the case for the Federal Reserve raising interest rates at its September policy meeting, while others chimed in with opposite predictions.
So, as has been the case all summer, the jury is still out on a Fed rate hike. But one thing is clear: Market volatility is back, and it doesn’t seem like it will depart anytime soon.

Breakfast for Lunch

One of the more intriguing news items of the week was McDonald’s (NYSE: MCD) decision to finally offer all-day breakfast, starting Oct. 6.
The past reluctance on McDonald’s part to mimic traditional roadside diner 24/7 menus was based on simple economics. It’s expensive to modify the assembly line so that Big Macs and Egg McMuffins can be cooked simultaneously. Currently, restaurant operators swap out cooking equipment during the transition from breakfast to lunch.
There’s also no guarantee that all-day breakfast will actually be popular, although franchisees voted overwhelmingly in favor of the change, and the company has stated that market testing that began six months ago has shown unspecified sales increases.
McDonald’s could certainly use a breakfast boost. In 2014, the company’s net income fell 15% on a 2.4% revenue decline.
Still, despite all the doom and gloom about McDonald’s nearly three-year sales slump and the threat from fast-casual burger upstarts like Shake Shack (NYSE: SHAK) and Smashburger, McDonald’s stock is essentially flat year-to-date, despite the recent  market turmoil.
The breakfast blitz is certainly the boldest step yet in McDonald’s much-discussed and long-awaited turnaround plan under new CEO Steve Easterbrook.
Here are some of my favorite Wyatt Investment Research articles from the week:
Top 5 Dividend Increases for September – On the surface, September appears to be an unexciting month for dividend seekers. Sure, dividend champs like PepsiCo (NYSE: PEP), Merck & Co. (NYSE: MRK) and Coca-Cola (NYSE: KO) are all paying dividends in September, but they’re not actually upping their payments. Instead, it’s the underrated stocks that are offering to pay you more.
Is It Time to Look at Oil Stocks? – There has been nowhere to hide for oil stocks. Over the past 20 years, only the crash of 2008 was worse than the current dip in oil prices. At that time, in a matter of months the price of oil fell by 75%, from a record high of $147. This time, oil has fallen 61%, from $110 to $43. With the price of oil and oil-related stocks so beaten up, the question now is what, if anything, should investors do?
The ‘Great Fall of China’ and the Future of Emerging Markets – The worldwide sell-off in equities in the aftermath of China’s “Black Monday” caused many pundits to prognosticate the doom of emerging markets in general. Yet a recent survey from management consulting firm A.T. Kearney showed that 500 CEOs of multinationals are expecting emerging economies to rebound. Eighty percent of the CEOs polled expect a rebound within a year. At the top of their list for growth opportunities: China and East Asia.
Stock Buyback Boom: Helping or Hurting? – Corporate stock buybacks are projected to reach $1.2 trillion this year, which would set a new record and shatter the previous mark of $863 billion in 2007. And yet, there are good reasons to be skeptical of all this share repurchasing activity.
A Billionaire’s Bold Gold Bet – With gold now at five-year lows, a gold bet is largely a wager that investor fear will increase. And one hedge fund legend is betting big on a gold-based position that now makes up 20% of his portfolio.
Are Hedge Funds Overrated? – Some of the biggest hedge funds are not only sitting on negative returns for the year, but they are performing no better than simple, diversified mutual funds available to everyday investors. Sure, the market did just see its biggest correction in years, but shouldn’t hedge funds be doing a good job of, well, hedging?
The Best Investment Strategy for a Declining Market – Many self-directed investors think buying put options is the best hedging strategy in a down market. But Wyatt Research options expert Andy Crowder begs to differ. He recommends utilizing what he calls the “ultimate protective strategy.”
Can Carl Icahn Unearth Big Gains From This Mining Stock? – Activist investor Carl Icahn is at it again. This time he’s taken an 8.5% stake in a languishing mining stock that holds $20.9 billion in total debt on its balance sheet and just $466 million in cash and cash equivalents. Can the Icahn touch work its cost-cutting magic?
Have a great Labor Day weekend!