This week was packed with newsworthy headlines as Netflix missed first quarter estimates, Google faces EU penalties and Apple and Amazon fight to the finish for a trillion valuations. Read on the get the details.
Appealing the Mega-Merger — the U.S. Justice Department has filed to appeal the decision that allowed the mega-merger between AT&T and Time Warner, even though U.S. District Judge Richard Leon made it fairly clear he believed the Justice Department’s case was weak. This merger was significant because it paved the way for more M&A activity in the telecom and media space, signs of which are already starting to crop up. The Justice Department’s decision to appeal is somewhat unsurprising, but also somewhat odd – the deal already went through.1
Netflix’s Shaky Numbers – earnings season is underway, and all eyes were on Netflix last week as one of the pillars of the so-called “FAANG” stocks. The street was blindsided – Netflix disclosed 670,000 new subscribers in the quarter, missing estimates by nearly 1 million. Netflix has now missed forecasts three times in the past 10 quarters, and its share price took a double-digit dip on the news. Given the FAANG stocks outsized influence on S&P 500 returns, this trend is worth watching closely.
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Instead of getting caught up in the ever-changing headlines, focus on YOUR financial situation. This can be more beneficial in the long-term in my experience.
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Google Slapped with EU Penalties — Google is once again set to be fined by the European Commission, but this time the number is rather astounding: $5 billion. The European Commission is asserting that Google used restrictive licensing practices to benefit its own services on Android devices, and it follows fines earlier in the year that the Commission imposed on the search engine giant for shopping services. Next up? The Commission is looking into Google’s online advertising contracts, to see if Google abused the Android’s market dominance to promote its own products. Since mobile phones represent Google’s biggest growth engine, this decision could have material forward looking impact on Google’s earnings.4
Meanwhile, Over at Amazon and Apple – it’s a race to $1 trillion. For the first time in history, a company is set to have a $1 trillion valuation, but the question is who will hit the milestone first – Apple or Amazon? Apple remains the world’s most valuable company, but Amazon is nipping at its heels as it reached a $900 billion valuation this week. Amazon reached its new high after it announced over $100 million in product sales on its annual “Prime Day Sale.” Amazon shares are up over 50% for the year and have soared over 100,000% since it debuted on the NASDAQ back in 1997.5
Reality Check on Global Growth – as negative headlines continue to swirl, particularly on trade, the global economy remains firmly in growth mode. We do not place too much stock in the International Monetary Fund’s projections or predictions, as they routinely change and rarely hit the mark perfectly. But they do offer guidance and oftentimes a range for the type of growth to expect on the global stage. The IMF stated this week that they expect the global economy to grow 3.9% this year and next, which would represent the best back-to-back years of growth since 2010 and 2011.6
Free Trade Isn’t Dead Just Yet – moving in the opposite direction of the United States, the European Union and Japan have signed the world’s largest bilateral trade pact covering one-third of global GDP. Calling themselves the “flag bearers of free trade,” Japan and the EU made a deal that involved material concessions on both sides, which aims to eventually reduce heavy Japanese tariffs on European wine, cheese and other foods, while lifting EU tariffs on Japanese cars and vehicle parts.7
While keeping an eye on “FAANG” stocks, Google’s EU penalties, Amazon and Apple’s valuations, global growth and other timely stories can help guide your investments, in my opinion, you do not want to get too caught up trying to predict what will happen next or how these stories could affect the market. In my experience, it can be more beneficial to focus on YOUR financial situation. While you probably can’t predict what will happen next with the market, you can try to prepare for what’s to come.
You may be wondering how you can determine your long-term goals, your risk tolerance, your investment time horizon and other factors that make up your financial situation. This can be a difficult process to navigate on your own. So, to help you get a head start, I would recommend referring to our guide, “4 Steps to Managing Your Retirement Assets.8”
This guide offers insight to help you make critical decisions about your retirement and outlines four simple steps that can give you an added advantage when you retire.
Disclosure