Private Client Group

August 25th, 2016

Consumer Preferences Shift Online

Share
Subscribe

It seems as the week comes to a close that change is in the air from India’s new Central Bank Governor to consumer preferences shifting online and Japan consider more interest rate cuts. Read more about these changes and additional news in this edition of Steady Investor’s Week…

More E-Commerce Stats – I also wrote recently about the retail revolution that’s underway, which is seeing the rapid closing of big box stores as consumers shift their preferences online. A research report came out this week that underscores the transition. Research firm eMarketer forecasts e-commerce sales globally to increase 24% Y/Y to $1.95T this year, which means online shopping could account for 8.7% of all of retail spending. Here in North America, e-Commerce sales are expected to jump 15.6% to $423.34B. eMarketer also expects retail e-Commerce sales to balloon to $4.058T in 2020, to represent around 15% of all retail spending. Expect these figures to continue climbing.

Japan’s Wormhole, Part II – in a previous article, I wrote about Japan’s downward spiral into the world of ineffective monetary policy, a zero interest rate trap, and how the fast-approaching demographic shift are all things that make their economic future look quite bleak. I just don’t see a secular case for growth in the country, and it is very difficult to imagine how it can emerge from deflationary pressures and flat to negative growth over the long term. Well, the desperate moves by Japan’s central bank keep piling on, as the central bank’s Governor, Haruhiko Kuroda, stated this week that he is ready and willing to cut interest rates into even more negative territory. Further negative rates cuts just mean falling deeper into the trap of ineffective policy, and it also could cause banks to hoard cash or invest abroad. Of course, this could boost demand for U.S. assets, which is good for domestic stock strategies.

India has a New Central Bank Governor in Town – while on the subject of central banking, we turn to India, where there has recently been a closely watched changing of the guard. India’s departing governor, Raghuram Rajan, was widely regarded as one of the best India has seen. He implemented and executed a number of policies from a redesigned monetary framework to bringing inflation down, raising Foreign Currency Non-Resident (B) deposits to bolster foreign exchange reserves, introducing transparent licensing for new universal and niche banks, and developing a large loan database to better map and resolve the extent of system-wide distress. In other words, he did a lot of reform work in the right direction. He’ll be missed, but now the market has turned all eyes to India’s newly appointed central bank chief, Urjit Patel. Many see this hire as a sign of New Delhi’s commitment to Rajan’s inflation-fighting policies, and the business community and market generally view it as hopeful. Mr. Patel is currently a deputy governor in charge of monetary policy at the Reserve Bank of India, and he has been appointed for three years at his new post.

Uber Losses – the ride-hailing behemoth that is seemingly taking over the world is actually just bleeding cash. According to a conference with the head of finance, Gautam Gupta, in Q1 2016 Uber lost about $520 million before interest, taxes, depreciation and amortization, and in the second quarter those losses mounted even further—significantly exceeding $750 million, including a roughly $100 million shortfall in the U.S. Taken together, it would mean that Uber’s losses in the first half of 2016 totaled at least $1.27 billion. Uber is still a private company, so there’s really no investment implication here just yet. But onlookers shouldn’t think about the company in a negative light or as just another dot.com that’s bleeding cash and going nowhere. Most of the losses came from China operations (which Uber has now exited) and because of subsidies for Uber’s drivers as they essentially pay to accumulate market share. Case in point, if you just look at U.S. operations Uber was profitable in Q1, and bookings grew tremendously from the first quarter of this year to the second, from above $3.8 billion to more than $5 billion. Net revenue, under generally accepted accounting principles, grew about 18 percent, from about $960 million in the first quarter to about $1.1 billion in the second.

With so many changes affecting the market, we are reminded of the turbulent state of the Stock Market. The question on many investors’ minds is, which sectors are likely to perform best in the current market conditions. Before making any moves, you may want to consult Zacks just-released Stock Market Outlook report. Filled with important facts and eye-opening forecasts, this report gives a sector by sector overview. Click on the link below to download the report now…

Disclosure

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. The information contained herein has been obtained from sources believed to be reliable but we do not guarantee accuracy or completeness. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.
READ PREVIOUS
How Can You Hedge Downside, Reduce Volatility and Achieve Growth?
READ NEXT
Why You Should Own Dividend-Paying Stocks

Explore Zack’s Archives

View
Mitch's Mailbox
May 1st, 2024
Keep Up With The Latest Rules On Inherited IRAs
Read more
Private Client Group
April 29th, 2024
Mixed Signals In U.S. Housing, U.S. And Europe Economies, Retail Sales Show Strength
Read more
Mitch on the Markets
April 29th, 2024
Why Small Caps Lagged Earlier in 2024—and Pulled Back More in April
Read more
Mitch's Mailbox
April 24th, 2024
What A Strong Dollar Means For The Markets And Economy
Read more
Private Client Group
April 22nd, 2024
Fed Rate Cut Retreat, Pension Funds Pull Billions From Market, High Oil Prices
Read more
Mitch on the Markets
April 22nd, 2024
How Badly Are Rate Cuts Needed In This Bull Market?
Read more

Daily financial tips directly
from the Zacks family.

Top

Search

Contact

I'm a Private Client I'm a Financial Professional