(Washington)

The US and Mexico’s last minute trade deal before a deadline this week left investors wondering what happened to Canada. Trump and the US’ northern neighbor have been in a spat on trade, but the US-Mexico breakthrough has apparently proven a catalyst for renewed talks. Canada’s foreign minister Chrystia Freeland has flown into Washington directly from Europe and will restart talks this morning as part of a last minute effort to reach a deal with the US.

FINSUM: Having Canada in on any new-Nafta deal seems very important, but we don’t doubt that a deal may not materialize given the current environment.

(New York)

For a long time, Walmart was one of the greatest growth stocks in history, growing from a small regional company to the largest retail chain in the nation. However, growth has evaded it for some time, and its quick expansion ended about 20 years ago. That may all be about to change, however. Walmart’s ecommerce operation is really taking off, growing at a 40% clip, at the same time as its in-store sales are rising at their fastest pace in a decade. Walmart is already the fourth largest online retailer in the US, but the stock has not given full credit to how well the company is doing, creating an opportunity for investors.

FINSUM: Walmart’s acquisition of Jet in 2016 was a smart one, and it has shown good leadership in ecommerce. We suspect the stock has a few years of good growth coming.

(Washington)

As the midterm elections are starting to heat up with various primaries, it is time to revisit how the elections will impact markets. Because Republican victories in the House and Senate would simply be a continuation of the status quo, the big question seems to be what happens if Democrats win one or both. The answer is that there will likely be little impact, but if there is, it could be positive, according to Barron’s. This is because having Democrats control the house (perhaps a likely outcome) would be seen as keeping the White House’s potential overreach on trade and the economy in check.

FINSUM: Historically speaking, the midterms have resulted in strong rallies for stocks. Why wouldn’t it be the same this year? We expect either little effect or a positive one.

(Washington)

Investors may not realize it yet, but the Fed is in a quite pickle: damned if they keep hiking, damned if they don’t. In what is being dubbed a potential “Dollar doom loop”, the Fed might create a cycle of excessive Dollar strengthening if it keeps hiking. This may cause an overseas debt crisis as many foreign borrowers, especially EMs like Turkey, have issued excessive Dollar-denominated debt. This would in turn put stress on Europe. Additionally, the strong Dollar strengthening would start to hurt US corporate earnings and exports, in turn weakening the economy and possibly causing the Trump administration to move to artificially weaken the Dollar. That said, if the Fed quits hiking, it risks the economy, which is already hot, quickly overheating.

FINSUM: This situation is very real, but luckily we think there is a pretty simple solution—only proceed slowly with hikes. It should be enough to keep the economy in check (given inflation is not high), but not so much as to send the Dollar surging (imperiling foreign borrowers).

(Washington)

The US and Mexico have reached an important trade agreement after a year of acrimonious bickering over Nafta. The new deal, from which Canada is conspicuously absent, will put harder trade restrictions on Mexico. The deal is a sign that Trump and the US are willing to ease their fight with neighbors as the country ramps up a battle with China. The Trump administration was in a rush to get a deal done before a power change coming in Mexico. The deal will no longer be called Nafta, but the US-Mexico trade agreement.

FINSUM: This is encouraging from our perspective. The last thing we want right now is a multi-fronted trade war. Hopefully a deal with Canada can be reached as well.