 The Market Sum | Insight after the bell
By Caleb Silver, Editor in Chief Wednesday's Headlines 1. Markets Rebound Amid Political Chaos 2. U.S. and Japan Reach Trade Agreement 3. Climate Change and Investing Markets Closed
 Markets Today
U.S. markets rebounded today amid the political chaos surrounding the congressional Democrats impeachment inquiry into President Trump. In the past 24 hours, I've been asked a lot about how individual investors should react to this news. They shouldn't.
The impeachment inquiry is just the latest political distraction that may impact the intraday performance of the stock market, but individual investors should ignore it to the best of their abilities.
U.S. and Japan Ink a Trade Deal Interesting day for this news to drop, but there are a lot of political leaders gathered in New York right now for the U.N. General Assembly, so expect a lot of news this week.
Under the terms of the deal, which is only in its first phase, the two countries agreed that U.S. tariffs on Japanese automobiles would be rolled back sometime in the future, although no specific date was set. In exchange for the removal of taxes on Japanese automobiles, Japan would in turn decrease tariffs against beef imported from the U.S. from 38.5% to 9%. Cheaper cars and cheaper beef... not exactly in the spirit of combatting climate change, which is the focus of this year's UN General Assembly, but a deal is a deal.
According to the U.S. Trade Representative, U.S. goods and services trade with Japan totaled an estimated $297.5 billion in 2018. Exports were $120.4 billion; imports were $177.1 billion. The U.S. goods and services trade deficit with Japan was $56.8 billion in 2018.  Climate Change and Investing One of the major themes of this year's UN General Assembly is climate change.
The UN 2019 Climate Summit is convening on the theme, "Climate Action Summit 2019: A Race We Can Win. A Race We Must Win." It will seek to challenge states, regions, cities, companies, investors, and citizens to step up action in the areas of energy transition, climate finance and carbon pricing, industry transition, nature-based solutions, cities and local action, and resilience.
You don't need me to tell you how important and immediate climate change is, but hopefully I can share some insights that will help you frame the topic as an investor.
If you are new to the topics of SRI (Socially Responsible Investing), ESG (Environment, Social, and Governance criteria), or Impact Investing, we've put together a guide to help you brush up.
When it comes to thinking about climate change and global warming, we can look at climate risk through the ESG prism, and the impact rising temperatures can have across asset classes. Of course, there are many other important ways to evaluate climate risk like species extinction, risks to biodiversity, and the humanitarian crisis. My wife is a conservation biologist, so these are dinner table conversations in my house.
For our purposes, we'll approach the topic as market participants.  According to US SIF: The Forum for Sustainable and Responsible Investment, climate change is the single most important ESG issue considered by U.S. asset managers. They say they have $3 trillion of assets that they invest for retail investors through the lens of climate change and carbon footprint. They invest around $8 trillion on behalf of institutional investors. The total amount of money invested is still less than 25% of the $46 trillion in managed assets, but it is growing.  Based on those estimates, $970 billion of the $3 trillion could be at risk within the next five years as global temperatures continue to rise, leading to sea level rise, more intense storms, and natural disasters like wildfires.
Companies and institutional investors are starting to assess and report their climate change-related risk, and nearly 2,500 investors who signed the UN Principles for Responsible Investment are required to comply with disclosing those risks through the Task Force for Climate Related Financial Disclosures. The TCFD was established by Michael Bloomberg, the former mayor of New York, and the billionaire entrepreneur and philanthropist who created the Bloomberg terminal.
Here are some important and startling numbers that put the impact of climate change into perspective.
This is just a small sample of the thousands of statistics and studies that have been produced around this topic, but I just wanted to share a few to provide a sense of scale around the issue. It's everyone's problem, but younger generations have demonstrated a much higher level of interest in investing in companies that don't emit carbon or contribute to global warming. They are expressing that interest by buying ETFs or Index Funds. There has been a perception that these products underperform the broader market because they exclude investments in the oil and gas sectors and other areas of the market built around the fossil fuel economy.
That's no longer the case, as oil and gas companies have underperformed the broader market for at least the last five years. Here's XOP, the ETF that tracks oil and gas producers, against the S&P 500 since 2014.  I'm barely scratching the surface on this topic, but we believe it is one of the most important issues facing investors today and into the future. If it's something you care about, we recommend the following resources to learn more about climate change and investing:
chart courtesy www.koyfin.com  Shares of Marathon Petroleum rose by over 8% today, after activist investment firm Elliott Management pushed the company to split into three separate businesses, which would divide its refining arm, pipeline division, and Speedway-branded gas stations. Cintas' stock price increased by nearly 6% following the company's report that it beat its fiscal Q1 earnings estimates.  SBA Communications fell the furthest today, with its shares dropping by over 3%. Broadcom's stock price decreased by more than 2% after it increased its original planned size of a convertible share sale to $3.25 billion.  Word of the Day Carbon TaxA carbon tax is paid by businesses and industries that produce carbon dioxide through their operations. The tax is designed to reduce the output of greenhouse gases and carbon dioxide, a colorless and odorless incombustible gas, into the atmosphere. The tax is imposed with the goal of environmental protection.  Today in Compensation History Sept. 25, 1943: The War Labor Board orders equal pay for women in the United States. That was only for work in war related industries, however. National legislation was finally passed in 1963, when John F. Kennedy signed the Equal Pay Law into effect, overcoming opposition from business leaders and the U.S. Chamber of Commerce, who were concerned that women workers were more costly than male ones. When he signed the bill, Kennedy called it a "significant step forward," and noted that, "It affirms our determination that when women enter the labor force they will find equality in their pay envelopes." The next year, the Civil Rights Act of 1964 prohibited discrimination on the basis of race, origin, color, religion, or sex.
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Wednesday, September 25, 2019
Heating Up
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