Displaying items by tag: US

(New York)

Markets are having a very rough day. Both the S&P500 and the Dow are down almost 3%. Financials have been leading losses. The selloff appears to be centered on fears over the fragility of the US-China trade “truce”. Treasury bonds have been rallying, leading to selloffs in tech and banks. The Treasury curve started to invert yesterday, which also seems to have spooked investors.

FINSUM: What a difference a day makes! Just yesterday it seemed like stocks might be lined up for a nice end of year run. A day later, the trade trace has created more tension than before and the yield curve is starting to invert.

(New York)

Markets and the global economy got some very welcome news this weekend. On the sidelines of the G-20 conference, President Trump and Chinese leader Xi came to a “truce” in their trade war spat this weekend after what they both called a “high successful meeting”. Accordingly, several industry-specific stocks should react well to the news. These stocks are: Stanley Black & Decker, Caterpillar, Emerson Electric, AGCO Corporation, and 3M.

FINSUM: Many of these stocks already have big tariff-driven headwinds in their 2019 outlooks, so the possibility for big reversals seems likely. A lot of gloom had already set in, which means there is significant upside.

(Washington)

The market has been worried about trade for almost half a year now, ever since the rhetoric surrounding it began heating up in June. It has been a major factor in several volatility events in stocks, including in October’s big selloffs. However, a meeting this weekend has the potential to put those worries to rest. Alongside the G20 summit this weekend, Trump and Xi will meet for dinner to discuss the trade tensions between their countries.

FINSUM: Trump and Xi seem like two men that get along well personally, but have an immense amount of competing interests that they need to represent. That said, we have faith that good personal relationships can help bridge such differences. (e.g. see the Cold War)

(New York)

Investors have gotten so used to low inflation that it is sometimes hard to imagine seeing it rise. However, Morgan Stanley is warning that inflation is rising across the globe and investors need to keep an eye on it. In Europe, Asia, and the US, inflation has risen from 1.1% to 1.4%, and it is bound to move higher, according to Morgan Stanley’s chief global economist. Interestingly, MS argues that the Euro area and Japan will see a higher rise in inflation than the US.

FINSUM: If inflation rises more strongly in other developed markets than the US, will that lead to even more foreign buying of US bonds because yields in those locations are so much lower? In other words, will there be even more demand for US bonds?

(New York)

One of the big mysteries in this recovery has been the fact that wages have not risen much despite the fact that employment has expanded greatly. Investors have gotten used to massive amounts of new jobs being created, but also to quite meager wage gains. Economists have been somewhat stumped as to why, but a new explanation makes a lot of sense—monopsony. Those with an economics background will immediate recognize the term. It refers to when there are many suppliers of something but only one buyer. In this case it is being applied to the labor market—there are tons of available workers, but quite few employers, especially in more isolated locations. This means the employer has sole negotiating power in dictating wages, leading to widespread wage stagnation despite a competitive labor market.

FINSUM: This seems like the outcome of all the corporate consolidation that has occurred over the last few decades. There are less employers, so they collectively have more power to hold down wages.