The Brexit is under way, Domestic GDP is on the rise, the competition for Thursday Night Football streaming rights continues, and bids for building the U.S. border wall are underway – to say the very least, this week was packed with newsworthy headlines. Get all the details in this edition of Steady Investor’s Week…
Brexit is Underway –Britain has officially requested to leave the European Union. In a letter delivered to EU’s President, Donald Tusk, Britain formally invoked Article 50, which begins the two-year process of ever-critical negotiations on trade, immigration, Britain’s payments into the pension system (basically the fine paid to leave), and security. The EU made it clear early on that they would not make it easy for Britain, and that Prime Minister, Theresa May, should not expect a conciliatory tone at the negotiation table. Britain is aiming for all the perks of free trade agreements but with control over its borders, and that is not how the EU works. If goods move freely, that means labor does too. We expect some tense negotiations over the next two years, and if a recession occurs in the process it could make matters even messier. In another twist, Scotland voted 69-59 to seek a new referendum on independence from Britain within the next two years, as a majority of Scottish voters favored staying in the EU. A messy situation, indeed. Meanwhile, the EU has been showing signs of strength, as its flash composite PMI rose to 56.7, hitting a nearly six-year high, from 56.0 in February. Economic strength will help give Europe leverage in the negotiations.
Key U.S. Economic Data – according to the Bureau of Economic Analysis, real gross domestic product (GDP) increased at an annual rate of 2.1% in the fourth quarter of 2016, according to the “third” estimate. In the third quarter of 2016, real GDP increased 3.5%. Both measures point to sturdy growth for the U.S. economy and support the Federal Reserve’s decision to hike interest rates. On the corporate profit front, profits from current production (corporate profits with inventory valuation adjustment and capital consumption adjustment) increased $11.2 billion in the fourth quarter of 2016, compared with an increase of $117.8 billion in the third quarter.
Attention NFL Football Fans – and there are a lot of you out there, given that 111 million people tuned into the Super Bowl this year. The Thursday Night Football streaming tug-of-war continues over who will obtain broadcasting rights. But, the entities competing for rights may surprise you. It’s between Amazon, Facebook, Twitter and YouTube. Last year, Twitter won rights with their $10 million bid, but the stakes will certainly rise this year.
Where Do Energy Stocks Go from Here? – last week President Trump signed an executive order that mandated the Environment Protection Agency to begin reviewing policies and regulations designed to combat climate change. Called the “Energy Independence” order, it will “permit more carbon emissions from power plants, rescind a ban on coal leasing on federal lands, and reverse rules to curb methane emissions from oil and gas production.” To be sure, the executive order does not change anything on Day 1, and there will be a lot of legal hurdles before any major policy shift takes hold. But all things being equal, loosening regulations on energy production may only add to the current supply glut keeping prices down, which may not do much to help Energy company profits. For investors, this may not make a strong bull case for Energy over the medium term. Interestingly, and in a surprising twist, Exxon Mobil wrote a letter to the Trump administration urging it to keep the U.S. in the 2015 Paris climate agreement. This is perhaps because the climate agreement incentivizes the use of more natural gas over coal, where Exxon can stand to profit more.
Bidding on the “Wall” – the Department of Homeland Security has extended a deadline to April 4 for companies to submit bids on the border wall. Nearly 700 companies have already submitted bids, including U.S. Concrete, Martin Marietta, and KBR. The requirements for the wall include being 18 feet high, unclimbable, prevent digging a hold for six feet beneath it, and have the side facing the U.S. be “aesthetically pleasing.”
This week has been filled with headline-worthy new stories, but the question on many investor’s minds is how will these stories impact the market? To give you insights into forecasts for what’s ahead, we invite you to download Zacks Stock Market Outlook report. This 24-page briefing for U.S. and global opportunities and risks is filled with stats and facts that back our latest forecasts. Get all the details in Zacks Stock Market Outlook Report. Click on the link below to download your free copy today:
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