U.S. companies are
looking outside of China for manufacturing in response to ongoing trade
disputes. Banks are turning to personal and business loans to drive revenue,
and Netflix saw its first subscriber loss in Q2. How can these stories and
others impact the market? Read on for details.
U.S. Manufacturers
are Moving Operations Outside of China – U.S. corporations have been
feeling the effects of the ongoing trade dispute between the U.S. and China. We
learned this week that following the tariff increase to 25% in May, many
corporations have decided to shift supply chains from China to other countries
in Southeast Asia. Popular U.S. brands like Crocs shoes, Yeti coolers, and
GoPro cameras are looking to countries like Vietnam, India, and Malaysia to
build new factories and fundamentally reshape global supply chains. Most
companies undertaking this move have said that these supply chain moves will
most likely be permanent, as doing so involves substantially time and financial
investment. This trend underscores the slowing growth numbers recently posted
from China, which could play into slower than expected global growth rates for
2019.1
Financials Post
Strong Earnings on Consumer Lending – The yield curve is “u-shaped,” but
for banks it may as well be flat or inverted. With the 30-year U.S. Treasury
Bond at 2.57% and the 1-year U.S. Treasury Bond at 1.95%,2 the net
interest margin for banks is tight. In these environments, one might reasonably
expect Financials not to post stellar earnings. But trends in consumer lending
are driving quarterly profits higher at banks like JP Morgan, Wells Fargo, and
Citigroup, which are reporting that consumers are taking advantage of low
interest rates by borrowing more and driving more business to consumer lending
divisions. As trading and investment bank fees stagnate or decline, banks are increasingly
turning to personal and business loans to drive revenues.3
________________________________________________________________________
Set Yourself Up for Long-Term Investing Success
Investing is emotional. A bull market can be as exhilarating
as a bear market is terrifying (ask any investor who went through 2008). But in
our view staying invested is key – since 1926, investors who remained in the
market over the long-term came out ahead 99% of the time.4
It’s important to maintain perspective during rough periods
so you don’t overreact. If you have $500,000 or more to invest, get our free
guide, How to Avoid Emotional Investing. It provides our advice, based
on decades of experience, to help you navigate through turbulent times.
Download Our Guide, How to Avoid Emotional Investing.5
___________________________________________________________________________
The Fate of the
USMCA – There has not been much reporting recently on the ‘new NAFTA,’
known as the USMCA. Many people may even believe that the new trade deal is law
– but it’s not. All new trade deals must be ratified by Congress, which has yet
to approve the new arrangements between the U.S., Mexico, and Canada. U.S.
Trade Representative Robert Lighthizer is best known today for his work trying
to arrive at a trade deal with China, but when he is not working with Chinese officials,
he spends time in the halls of Congress trying to sell the USMCA. Disagreements
remain over enforcement provisions for the deal.6
Netflix Loses
Subscribers in Q2 – Signal of a Broader Slowdown? – In an anecdotal (and
earnings related) sign that the business cycle may be turning over, Netflix
reported this week that its total number of subscribers actually declined in Q2, the first time that’s
happened in nearly a decade. Netflix said it lost 130,000 domestic subscribers
in the quarter, which could be a sign of economic slowdown or evidence of
long-term growth challenges that face the company as competition grows fiercer
from rivals like Hulu, Disney, Comcast, and Apple. Netflix remains king of the
space with 60.1 million U.S. subscribers and 91.5 million globally, but growing
pains could weigh on the company and the stock looking ahead.7
No matter how
these stories unfold, it is impossible to control the highs and lows of market.
But there are ways you can manage the highs and lows of your own emotions and
stay focused on your long-term goals.
In our view, staying invested is key – since 1926, investors who remained in the market over the long-term
came out ahead 99% of the time.8
If you have
$500,000 or more to invest, get our free guide, How To Avoid Emotional Investing.9 It provides our
advice, based on decades of experience, to help you navigate through turbulent
times.
Disclosure
1 The Wall Street Journal, July 18, 2019, https://www.wsj.com/articles/manufacturers-move-supply-chains-out-of-china-11563096601?mod=djem10point
2 U.S. Department of the Treasury, July 17, 2019. https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield
3 The Wall Street Journal, July 16, 2019. https://www.wsj.com/articles/consumer-lending-powers-big-bank-earnings-upstaging-wall-street-11563301446?mod=djem10point
4 Source: Morningstar Direct, 12/31/18. Analysis is performed by looking at the rolling monthly return periods for the S&P 500 Index over the 1-month, 3-month, 1-year, 5-year, 10-year and 15-year to determine if the total return of the index was positive. Respective percentages were calculated off of the number of periods that the index was positive out of the entire history of the data set from 1926-2018.
5 ZIM may amend or rescind the “How To Avoid Emotional Investing” guide for any reason and at ZIM’s discretion.
6 The Wall Street Journal, July 17, 2019. https://www.wsj.com/articles/lighthizer-charms-congress-but-struggles-to-sell-usmca-11563355920
7 The Wall Street Journal, July 17, 2019. https://www.wsj.com/articles/netflixs-new-subscriptions-fall-short-in-latest-quarter-11563395753?mod=djem10point
8 Source: Morningstar Direct, 12/31/18. Analysis is performed by looking at the rolling monthly return periods for the S&P 500 Index over the 1-month, 3-month, 1-year, 5-year, 10-year and 15-year to determine if the total return of the index was positive. Respective percentages were calculated off of the number of periods that the index was positive out of the entire history of the data set from 1926-2018.
9 ZIM may amend or rescind the “How To Avoid Emotional Investing” guide for any reason and at ZIM’s discretion.
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