Thursday, November 29, 2018 - Insight after the bell from Investopedia's Editor in Chief
| | | | INV Anxiety Index
100.50 0.00% | | US 10-Yr Yield
3.028% -0.94% | | | | To Deal or not to Deal
It was a slow day for corporate news and U.S. markets were unable to hold their intraday gains and ended in the red, snapping a three day rally. Wednesday's mega-rally had no legs, which has been the pattern for U.S. markets since September. As of the close today, the DJIA and the S&P 500 are essentially flat for the year, while the Nasdaq is up about 3 percent. Funny…it doesn't feel like that lately.
It's not just lately, and it's not just you. Betterment ran a survey earlier this fall wherein 48 percent of the participants thought the stock market had not gone up at all in the past 10 years. 18 percent thought it actually went down. They shouldn't feel too bad, though. They only missed a 200 percent increase in that time period. Too often we forget that so many people are either not invested at all, or invested, but mostly unaware of what is happening with their money.
In other news, all eyes are on Buenos Aires and the G20 meetings coming up this weekend. President Trump and China's President Xi are expected to dine together and hopefully resolve the escalating trade war that is rattling companies and investors all over the world.
Why it Matters: If there is no progress, Trump is prepared to raise tariffs on $200 billion worth of imports to 25 percent from current levels of 10 percent, and could add tariffs on another $267 billion worth of imports, according to Larry Kudlow, a senior adviser to the President. China has proven that it won't take these increases sitting down, so expect retaliation in kind if dinner doesn't go well between the two.
If you're interested in the actual products subject to higher tariffs, take a browse through the Tariff List from the U.S. Trade Representative of the 5,745 items subject to increases. It's everything from granulated steel slag to sardines.
Remember, the G-20 was established in the throes of the 2008 financial crisis to douse the flames of a global financial bonfire. It was a summit intended to foster cooperation among the world's biggest economies, and it was that way for a few years. But, at last year's summit in Germany, a newly elected President Trump refused to endorse the Paris Climate Accord, and later pulled the U.S. out of it.
Argentina, the host country, wants to focus on The Future of Work, Infrastructure Development and Food Security. Those are all worthy topics, but I doubt they'll make headlines given the Trump-Xi tango.
Even the Fed is worried about the escalation of a tariff war. The FOMC released the minutes from its October meeting today (kind of like a transcript and notes from the two day meeting). While tariffs have come up in past meetings, this was the first time Fed governors tied them to the global economic slowdown.
From the Minutes:
"Participants observed that growth in business fixed investment slowed in the third quarter following several quarters of rapid growth. Some participants pointed to anecdotal evidence regarding higher tariffs and uncertainty about trade policy, slowing global demand, rising input costs, or higher interest rates as possible factors contributing to the slowdown."
What's Next: Investors may see a silver lining in all this, which is that concerns about a tariff war may be yet another reason the Fed will keep hitting the brakes on future rate hikes, which is good for stocks. A 0.25 percent hike in December is very likely, but future hikes in 2019 are anything but, as I mentioned in yesterday's newsletter.
Beyond the G20 this weekend, here are a few other key dates that could move the markets and set the tone for 2019: - December 7th: November Jobs Report
- December 8th: Deadline for a government spending bill to avert a shutdown (Read more on what to expect leading up to December 8th)
- December 11th: House of Commons (UK) Vote on Brexit
- December 18-19: Next FOMC meeting on interest rates
Chart of the Day: Credit Card companies find the sweet spot
It's easy to overlook certain sectors and industries that have remained resilient and are continuing to surge despite the recent market turbulence. Companies leading the credit/debit/charge card industry form one corner of the market that has performed strongly for years, and have seemed to weather market downturns relatively well.
Chief among these companies are the ubiquitous Visa (V), Mastercard (MA), and American Express (AXP) brands, which are all S&P 100 companies. The latter just hit a new record high above $113 on Wednesday. Though American Express has risen a comparatively modest 11% year to date, its gain from the February 2016 bottom is more along the lines of 120%.
As for Visa and Mastercard, their stock moves understandably mirror each other, as their services and offerings share many similarities. Both companies hit recent all-time highs on the same day – October 1st, though MA is up nearly 30% year to date while V is up a more modest 21%. Both have gained well over 100% within the past three years.
So what's the takeaway from this? If you're not already invested in this industry, it's obviously too late to take part in its exceptional past returns. But if you're looking for potentially strong performers over the long-term, these financial services companies might be worth consideration.  Enjoy the Market Sum? Share it with a friend. CONNECT WITH INVESTOPEDIA |
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