| Wednesday's Headlines 1. U.S. markets rise as Phase One deal is signed 2. Trump administration teases more tax cuts ahead 3. Rail cargo keeps declining 4. Stock ownership is mirroring income inequality Markets Closed
 Image: SAUL LOEB / GETTY IMAGES Markets Today Investor euphoria over the signing of Phase One of the U.S.-China trade agreement lasted for about an hour as markets spiked in celebration of this long-awaited milestone. Gains were pared in the afternoon, however, as investors settled down and dug into the details of this phase and what might come next. We broke down the main parts of the agreement yesterday, but to put it into dollars and cents, China agreed to buy an additional $200 billion worth of U.S. goods over the next two years. Specifically, China agreed to buy the following:
If you want to read the entire text of Phase One with every detail of what was signed today, here it is.
Tariffs will remain on $360 billion worth of Chinese goods and the White House said it will wait at least 10 months to evaluate lifting those.
Headlines
Cargo Alert It's been awhile since I sounded the alarm on one of my favorite indicators, but given the signing of Phase One today, I thought it was appropriate.
U.S. rail volume declined nearly 10% last week from the same period a year ago, according to the American Association of Railroads.
The trade group blamed the weakness on fewer chemical and coal shipments, but also the ongoing trade war with China. If you look at last week's data below, we see a continuation of that trend - particularly with coal.  It won't surprise anyone that coal shipments are down as the U.S. and a lot of other developed countries move away from it as an energy source. But the declines over the past three years are pretty extreme. Improvements in the trade relationship between the U.S. and China are not likely to improve coal prices since China is not even in the top 5 of the countries where the U.S. sells its coal. The top 5:
chart courtesy YCharts  Stock Ownership Becomes Even More Concentrated In yet another sign of wealth inequality, recent statistics about stock ownership in the U.S. reveal that just 10% of the population own nearly 85% of all stocks held by U.S. households. Those figures include direct ownership as well as indirect ownership through retirement plans like 401(k)s, IRAs, and other accounts. Limited ability to invest likely exacerbates inequality because of how high the returns from U.S. equities have been in the past decade. chart courtesy Deutsche Bank  The numbers are not as surprising as the fact that the majority of Americans who can invest in the stock market choose not to, preferring to keep their money in savings or money market accounts that yield less than 2%, which is below inflation. Here's the flow into money market funds over the past decade. Look at the spike in 2019, just as the S&P 500 rang up a 30% annual return. chart courtesy FRED 
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(chart courtesy YCHARTS)  Utility PG&E continued to rise today as Citigroup upgraded it to a "buy" as it seems close to reaching a restructuring deal with its creditors.  Biotech firm Nektar Therapeutics pulled its application for a pain drug after an FDA advisory committee suggested the FDA not move forward with it. After a spectacular recent rise, plant-based meat-substitute maker Beyond Meat gave up some of its gains after Bernstein downgraded it to "market perform." Maker of computer networking supplies Ubiquiti fell today after Credit Suisse analysts downgraded its stock to "underperform." First Solar's stock fell after Barclays capital downgraded it twice from overweight down to underweight. Retailer Target fell after reporting weak holiday sales. Word of the Day The Gini index or Gini coefficient is a statistical measure of distribution developed by the Italian statistician Corrado Gini in 1912. It is often used as a gauge of economic inequality, measuring income distribution or, less commonly, wealth distribution among a population. The coefficient ranges from 0 (or 0%) to 1 (or 100%), with 0 representing perfect equality and 1 representing perfect inequality. Values over 1 are theoretically possible due to negative income or wealth.  Carl Court / Getty Images Today in History January 14, 1784 This time last year, the U.K. parliament resoundingly rejected Theresa May's Brexit deal, 202 to 432. The vote was the largest parliamentary defeat for a sitting government in U.K. history. The defeat was significant enough that opposition leader Jeremy Corbyn called for a no-confidence vote that was only narrowly defeated 306 to 325. While she weathered that vote, she would resign later in the year after failing to get parliamentary approval for her Brexit plan. She was succeeded by Boris Johnson who won the Conservative party leadership election in July. He struggled to move forward with Brexit until his landslide victory in the December 2019 parliamentary elections where conservatives gained big against an opposition divided among several parties. Brexit is scheduled to happen on January 31st. The U.K. will remain in the EU's free trade zone until the end of 2020, by which time Johnson's government will have to have a new trade deal in place or abruptly crash out of the EU's free-trade zone. Sources: https://www.bbc.com/news/uk-politics-46885828 https://www.csmonitor.com/World/Europe/2019/1230/Britain-leaves-EU-on-Jan.-31.-But-here-s-why-Brexit-won-t-be-done
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Wednesday, January 15, 2020
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