While Banks saw their most profitable quarter, IPOs reached a record low bringing into question investor’s confidence in the strength of the market. Overall, this week proved to be full of ups and downs. Read more in this edition of Steady Investor’s Week…
Record Banking Profits (for U.S. Banks) – as banks in Europe and Japan struggle to grow earnings with negative interest rates, banks in the US have fared much better. In spite of increasing regulation with additional Frank-Dodd rollouts and subpar stock performance, US banks recorded its most profitable quarter ever. Earnings for the three-month period totaled $43.6 billion according to SNL Financial and S&P Global Market Intelligence, compared to $43.01 billion in Q2 2015, which marks an increase of 1.4% beat. From the previous quarter, earnings grew by $4.56 billion, which was an 11.7% rise.
Impeached! – the motion to impeach (now former) Brazilian President, Dilma Rousseff, was made in December 2015. But now it’s official. Her administration was accused of using illegal loans from state banks to hide the true flailing status of Brazil’s federal finances. On an individual basis, Rousseff was also accused of omitting irregularities associated with special treatment of Brazilian oil company Petrobras, of which she was on the board of directors. It all smells pretty fishy, but in a sense it’s impossible to know with certainty whether her government just wanted her gone or whether she committed real crimes against the state. Either way, she is not going down without a fight. She has pledged to appeal her impeachment, and throughout the process has called on her supporters to fight the conservative agenda empowered by her dismissal. Brazil’s economy is unlikely to see help in the near term, given the uncertainty that is likely to loom in the aftermath of her dismissal. Michel Temer will be sworn in as Brazil’s new president.
Apple Gets Challenged by the European Union – authorities in the European Union ordered Ireland to get back about $14.5 billion in ‘unpaid’ taxes, after ruling that Apple utilized a scheme to route profits illegally through the country. The Commissioner behind the ruling, Margrethe Vestager claims that the selective treatment allowed Apple to pay an effective corporate tax rate of 1% on its European profits in 2003 and 0.005% in 2014. Apples’ CEO, Tim Cook, was less than pleased with the ruling, comically calling it “political crap.” Apple Inc. and Ireland said they would appeal the decision.
Driverless Cars Are Coming, but What about Captain-Less Ships? – Captain-less ships they’re likely on the way, too. The British engine maker Rolls-Royce is leading the pack of companies attempting to design and implement the technology, with a goal of creating a future where ships sail the open sea without a crew. The name of Rolls Royce’s initiative is Advanced Autonomous Waterborne Applications, and it predicts that the technology could cut shipping costs by 22%.
IPO Resurgence? – IPOs have been a dry well for the US equities markets this year. Through August, new share issuance was expected to have its worst year on record, with only 63 new companies listing on stock exchanges and raising a paltry $13 billion. Low share issuance is good for the supply/demand trade-off in the stock market, and it could also be a symptom of many companies’ desire to remain private and maintain control. But, at the same time, the lack of activity could be driven by low confidence in the strength of the market. Either way, it looks like the IPO market is due to gain a little steam. After the Labor Day holiday, there are a few key names listing on the market. Some of them you may recognize: Valvoline (pending ticker: VVV), Nutanix (pending ticker: NTNX), and Yeti Holdings (pending ticker: YETI).
With IPOs at an all-time low and many investors questioning their confidence in the strength of the market, there seems to be an overarching sentiment of concern for the overall state of the economy and what it holds for the future. With that many investors are looking for the best way to guide their investments to success even in this volatile market. At Zacks Investment Management, we do not get caught up in the gloomy headlines. Instead, we stick to the facts and always look to hard data to provide context for investing decisions. If you want to get an inside look into what we are seeing, download our Stock Market Outlook Report by clicking on the link below. This report is an invaluable resource that can help you apply a critical eye to your investments and near-term plan
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