Displaying items by tag: tariffs

Friday, 17 August 2018 08:45

Luxury Stocks are Facing a Big Threat

(New York)

If you hold luxury retail stocks or are thinking of doing so, think again. With all the fears over a trade war, many luxury stocks look vulnerable. While Gucci owner Kering and Louis Vuitton owner LVMH look insulated, look out for weakness in Burberry, Salvatore Ferragamo, and Swatch. The first two look particularly weak because they are trying to regain traction with consumers at the same time as facing trade tensions (as opposed to Gucci, which is very hot at the moment). Most luxury stocks are currently trading at a premium relative to the market.


FINSUM: In our view, the brands that are already hot are going to stay on the shelves, but ones that haven’t been selling as well will be more impacted by trade tensions as wholesalers can more easily just stop stocking them.

Published in Eq: Large Cap

(New York)

The Wall Street Journal has put out an article painting an interesting, and perhaps realistic, view of how the trade war might play out. Their argument is essentially that the market itself will stop any trade war from becoming too serious. The WSJ says it best, “If the Trump trade war starts to squeeze economic growth, markets will react badly. When this happens, the impatient American president will have no choice but to declare victory, call off the war, and limit the damage”.


FINSUM: We tend to think this view is probably correct. That said, these kind of tariff wars can have unintended consequences that could make the damage more extensive and permanent than it is currently easy to foresee.

Published in Macro
Thursday, 26 July 2018 09:32

“Carpocalypse” Descends on Auto Stocks

(Detroit)

An absolute nightmare befell the auto sector yesterday. While the market has been increasingly concerned about the effect of Trump’s metal tariffs and the counter-tariffs from trading partners, yesterday’s meltdown was sparked by poor earnings. It started with GM and Fiat Chrysler, both of whom got walloped on weaker than expected earnings. Then Ford came in with an $11 bn restructuring plan that seemed to contradict the promised $25 bn of cuts it had previously announced. What was odd about the numbers is that they come when the economy is doing quite well. “To have a quarter like this is striking … Every time they turn over a rock, they find more problems”, says one auto market analyst.


FINSUM: Between looming tariffs and weak underlying sales, car companies seemed to be facing a definite reversal of fortunes after several years of good performance.

Published in Eq: Large Cap
Wednesday, 25 July 2018 10:19

Did Trump Just End the Trade War?

(Washington)

President Trump may have just ended a major part of the current trade war. All eyes have been focused on the President’s meeting with European Commission head Juncker today in Washington, an encounter that could spark trade fireworks between the US and EU. Most have said they have little hope of a positive outcome. Now, that might be entirely changed as the president last night tweeted out what must be the most hopeful statement of the whole trade war. He said “The European Union is coming to Washington tomorrow to negotiate a deal on Trade. I have an idea for them … Both the U.S. and the E.U. drop all Tariffs, Barriers and Subsidies!”.


FINSUM: It would be absolutely amazing to go from an escalating trade war to a US-EU free trade panacea. It seems unlikely to happen, but it could be a positive sign of collaboration.

Published in Macro

(Washington)

It looks like the EU is going to pullout all the stops to try to avoid a trade war with the US. EU commissioner head Juncker is going to meet in Washington this week with President Trump to offer some new avenues for discussion as a way to avoid a broad tariff package. Trump is threatening a $50 bn tariff package on the EU, which he says has taken advantage of the US in trade. Europe is particularly worried for their car exports to the US, which are very vulnerable to Trump’s potential tariffs.


FINSUM: We have a hard time imagining Juncker is going to say anything to dissuade Trump, but maybe the EU has something sweet to offer.

Published in Politics
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