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September 16th, 2019

Google Antitrust Probe, Fed Studies Trade War, China Growth Questioned

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In today’s Steady Investor, we answer some of the top questions on investor’s minds such as:

Read on to get the details!

New Fed Study Measures Economic Impact of Trade War – A new Federal Reserve study was released this week, as the Fed worked to quantify the economic impact of the trade war. Readers should note that these types of studies notoriously miss the mark in projecting hits to growth, with perhaps the best example of erroneous projections historically coming from the independent Congressional Budget Office (CBO). In short, the Fed’s findings should be noted, but not taken at face value. The research pegged the hit to economic growth in 2020 at -1%, which under current circumstances would mean cutting growth essentially by half. One relevant investor takeaway from the research, however, is that the Fed is likely to use their findings to inform monetary policy on a going forward basis. The next Fed meeting is on September 17-18, where market-watchers largely believe another quarter point rate cut is due.1

China Takes Steps to Boost Economy – Big news from the People’s Republic of China last Friday, as the government announced it would reduce the reserve requirements for banks by a half percentage point. ‘Reserve requirements’ represent the amount of cash that a government or central bank requires a bank to keep on hand relative to liabilities, so that in the event of a crisis or a downturn the bank will be able to stand on its own two feet. Following the 2008 global financial crisis, the U.S. raised reserve requirements for banks substantially but have tempered them slightly since. In China’s case, lowering the reserve requirement could mean freeing up $126 billion into the financial system, which banks can use to take make loans and take risks – two key contributors to economic growth.2

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Download Our Dean’s List of Investment Strategies!
 
You can’t predict how these events will affect the economy or when the next downturn will occur. But the right investment strategy can make a huge difference in preparing your long-term investments for success.
 
To help you learn more about strategies that cater to different investment objectives, we have created our Dean’s List of Investment Strategies. Our Dean’s List describes five of our investment strategies that are ranked in the top 9% of their respective classes according to Morningstar (as of 6/30/19).3
 
If you have $500,000 or more to invest and want to learn about five of our top strategies, click on the link below.
 
Learn More About Our Top-Ranked Strategies!4

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48 States Band Together in Antitrust Investigation of Google – The biggest technology companies continue to feel the heat of increased regulatory scrutiny. In a major announcement this week, 48 Attorneys General – led by Texas AG Ken Paxton – have joined together for an antitrust investigation into Google’s practices as they relate to online advertising markets. Website publishers and small businesses have been complaining for some time that they have no choice but to use Google’s ad services, since the company owns and operates the technology for placing ads online. Google not only rakes in revenue from placing ads on its search site, but also by placing ads on other sites across the internet that often ‘follow you around’ as you browse. As state Attorneys General investigate Google, it is also in the crosshairs of the Justice Department, which is looking into the actions and business models of Google, Facebook, and Amazon. Only two states, California and Alabama, declined to join the antitrust investigation.5

Is China’s Economic Growth as Robust as It Claims? The validity of China’s GDP growth figures has long been an interest of economists around the world, and there is a growing chorus that the second largest economy in the world has been inflating their numbers. Researchers and economists have been searching for new ways to collect hard data on China, from analyzing corporate profits to taking a closer look at tax revenue, rail freight, property sales, exports, and other data that China’s government may have a difficult time altering (i.e., private sector data). By some estimates, China’s economy could be growing at half the rate it claims to be, which would mean economic output more in line with U.S. growth rates.6  The end takeaway here is not necessarily to take claims of a much weaker China at face value, but rather to acknowledge that on balance, China is weakening.

There is no way to know exactly where the market is headed or how these stories will pan out, but finding the right investment strategy can make a huge difference when managing the highs and lows of the market. To help you learn more about strategies that cater to different investment objectives, we have created our Dean’s List of Investment Strategies.7
 
Our Dean’s List describes five of our investment strategies that are ranked in the top 9% of their respective classes according to Morningstar (as of 6/30/19).8 If you have $500,000 or more to invest and want to learn more about these strategies, click on the link below to see how they could potentially benefit you.

Disclosure

1 The Wall Street Journal, September 5, 2019. https://www.wsj.com/articles/trade-uncertainty-likely-to-cut-u-s-growth-by-more-than-1-fed-research-says-11567702473?mod=djem10point

2 The Wall Street Journal, September 6, 2019. https://www.wsj.com/articles/chinas-central-bank-to-free-up-126-billion-for-lending-11567765871?mod=djem10point

3 ZIM may amend or rescind the “Dean’s List of Investment Strategies” guide for any reason and at ZIM’s discretion.

4 These rankings may not be representative of any one client’s experience. In addition, they are not indicative of future performance

5 The Wall Street Journal, September 9, 2019. https://www.wsj.com/articles/attorneys-general-launch-probe-of-google-11568055853?mod=djem10point

6 The Wall Street Journal, September 8, 2019. https://www.wsj.com/articles/china-says-growth-is-fine-private-data-show-a-sharper-slowdown-11567960192

7 ZIM may amend or rescind the “Dean’s List of Investment Strategies” guide for any reason and at ZIM’s discretion.

8 These rankings may not be representative of any one client’s experience. In addition, they are not indicative of future performance

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 as 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. 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.

Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.

Certain economic and market information contained herein has been obtained from published sources prepared by other parties. Zacks Investment Management does not assume any responsibility for the accuracy or completeness of such information. Further, no third party has assumed responsibility for independently verifying the information contained herein and accordingly no such persons make any representations with respect to the accuracy, completeness or reasonableness of the information provided herein. Unless otherwise indicated, market analysis and conclusions are based upon opinions or assumptions that Zacks Investment Management considers to be reasonable. Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein.
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