In this week’s Steady Investor, we look at key stories and the questions surrounding their market impact such as:
Tariffs Still a Central Obstacle to “Phase 1” of a Trade Deal? Markets seemed relieved in the last week that the U.S. and China were nearing Phase 1 of a trade deal. The ‘terms’ of the trade deal appeared to be headway on agricultural purchases, technology transfer rules, and more opening of China’s markets. But perhaps the greatest source of relief was the notion that tariffs would be reduced or eliminated, and that plans for future tariffs would be shelved. The reality on the ground, however, seems to be much different. Much like a majority of this trade dispute, there are plenty of signals that both sides are making headway – only to find after more details are fleshed out that the two sides actually remain far apart. In a speech this week at the New York Fed, President Trump suggested that he could even raise tariffs substantially if the two sides cannot reach an agreement. Then, late last week, China refrained from putting a number on purchases of U.S. agricultural products like soybeans and pork, whereas President Trump has stated the agreement is for $50 billion.1 Our read on the situation is that the two sides are not any closer to reaching a deal.
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Is Soaring Debt in the Auto Market a Problem? 10 years ago, 19% of Americans who traded in cars for new ones did so with negative equity. In other words, they owed more on the car than it was worth at time of trade-in. Five years ago, that number jumped to 28%. Today, it’s up to 33%. The trend is clear that debt in the auto markets – which we would consider bad debt – is growing at a fairly rapid pace. While this may sound bad for only the consumers taking on bad debt, it’s actually a potential negative for lenders and dealers. Lenders have a higher risk of defaults on loans while dealers are allowing some of the negative equity to be transferred to a new loan, worsening the problem. In some cases, consumer lawyers have reported seeing car loans where a person owes more than 130% the value of the car,3 which feels like a reckoning waiting to happen.
The SEC Cracks Down on High-Fee Mutual Funds – in the past year, the Securities and Exchange Commission (SEC) brought 526 enforcement actions for all matters of financial fraud and wrongdoing. But a boost to this year’s tally was due to the 95 enforcement actions brought on investment advisors for “inadequately disclosing their practice of selling more expensive funds to retail clients,” according to the SEC. The shift in cases brought indicates that the SEC is more focused on protecting everyday investors, particularly those who may not be as sophisticated as higher net worth or institutional investors. Of the 10 biggest fines levied by the SEC, 55% of them went to individuals or shell companies that did not actually have real operations or proper licenses.4 These frequency and size of these fines underscores how there is still work to be done in weeding out corruption in the financial markets, and it also underscores how investors should look for advisors that adhere to the fiduciary standard – meaning they are obligated by law to act in your best interests. We adhere to the fiduciary standard here at Zacks Investment.
There is no way to know exactly where the market is headed or how these stories will pan out, but taking time to plan for your financial future can give you peace of mind in times of uncertainty.
This preparation can help make a smooth and happy transition to the next chapter of your life. If you are planning on retiring in the next month, two months or half a year, you need to make sure you’ve considered some core factors and made decisions ahead of time.
To help you do this we have created our guide, “6 Secrets to a Happy Retirement.” If you have $500,000 or more to invest, get our free guide today. You’ll learn some of the most important “big picture” ideas that should be a part of your planning to help ensure a happy retirement.
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