Trump’s budget makes its way to Congress while the EU plays hardball during Brexit negotiations. What do these news stories and others hold for the future? Get all the details in this edition of Steady Investor’s Week…
Will the U.K. Bail on Brexit Talks? – As promised, the European Union is playing hardball with Britain in the Brexit negotiations, insisting that Britain pays 100 billion euros to leave the bloc. According to the EU, that would fulfill Britain’s pension and other obligations according to the bylaws of membership. Britain is pushing back fiercely. Brexit Secretary, David Davis, said that Britain would not be paying out this money and that the EU should drop their demand unless they want negotiations to devolve into chaos, which at this pace seems inevitable. Mr. Davis said that even 1 billion euro would be too much money, signaling that the two parties could not be further apart on their viewpoints. To make matters more complicated and difficult for Britain, this week a horrific terrorist attack took place at an Ariana Grande concert in Manchester, England. 22 innocent concert goers were killed and 59 wounded according to reports, so Britain is on lockdown in dealing with the crisis. Capital markets were controlled following the attack and the news, with the sterling trading modestly lower and the FTSE 100 even posting some modest gains.
Europe in a Firm Recovery Trend – Europe continues to enjoy impressive growth numbers, at least when compared to the last few years. In April, businesses in Europe even struggled to keep up with growing demand, and the IHS Markit’s Flash Composite PMI matched the previous month’s 56.8. This strong expansionary pace could mean a stronger than expected GDP reading for Europe in the second quarter, which the markets would likely cheer. But, there’s still Greece, whose bailout talks with the EU have once again ended without an agreement. This problem won’t seem to go away, and it once again leaves the eurozone scrambling to work out a deal before Greece faces crippling repayment deadlines in July. The infighting between Germany, Greece, and the IMF over the deployment of the 86-billion-euro bailout package is a war between austerity pressure (from Germany) and Greece’s political problem. These issues have been resolved several times over in the past, and this is an old story, but its tirelessness may at some point weigh on Europe.
A New Era of Energy – oil and natural gas are still the kings of the energy mountain, and likely will remain so for the foreseeable future given the supply abundance and inexpensive extraction and use. But for those ready to engage with the future of renewable energy use, look no further than companies like Tesla and countries like Germany as they battle for market dominance in battery making. Indeed, battery making gigafactories are about to arrive in Europe, challenging a project already underway for Tesla as they build a plant in Nevada. Germany’s Angela Merkel broke ground this week on a 500-million-euro facility that will mass assemble lithium-ion energy storage units for Daimler. Large-scale factories are also planned for Sweden, Hungary and Poland.
The President’s Budget Makes Its Way to Congress – the president’s $4.1 trillion budget landed on members of Congress’s desks this week, and as expected there are large cuts to numerous programs and big boosts to programs like defense, border security, and infrastructure. The cuts come from programs like Medicaid, food stamps, the EPA, and other social programs. In total, the proposed spending cuts would amount to $3.6 trillion over the next decade. The budget was short on detail about how the spending boosts would be paid for, given the president’s intended tax cut. Some of the boosts in outlays is based on a projected 3% GDP growth rate that would come from the tax cuts and other stimulus measures, but such growth is far from guaranteed – especially with an economy already at full employment. The budget also calls for selling half of the nation’s Strategic Petroleum Reserve and permitting drilling in the Alaska refuge.
As this week comes to a close, news stories leave us with more unanswered questions. With that, it can be very time-consuming for investors to keep up with shorter-term trends, news and events that could impact their investments. To help give you a leg up, we’ve laid them out for you in our newly released Zacks’ Stock Market Outlook report. This exclusive Report is a quick read but contains predictions that can help you assess your portfolio. Learn more by clicking on the link below:
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