China “Phase 1” Problems, Possible Brexit Breakthrough, Weak September Retail
In today’s Steady Investor, we look at what is going on in the markets and key takeaways for investors to consider, such as:
- U.S. corporate earnings are likely to report a soft Q3
- Is “Phase 1” of the U.S.-China Deal Already Falling Apart?
- Britain and European Union negotiators reached an agreement on Brexit
- Could weak September retail sales figures be a sign of recession
Read on to get the details!
Earnings Season Kicks Off on a Positive but Cautious Note – U.S. corporate earnings are likely to report a soft Q3, with total earnings for the quarter estimated to decline -5% on +4.2% higher revenues, according to Zacks estimates. We expect 11 of the 16 Zacks sectors to post lower earnings compared to the year-earlier period, including the high cash flow Technology sector.1 While this may appear, at first glance, like negative news, there are a few factors to note. The first is that this particular patch of weaker earnings was largely expected, coming off high comparisons resulting from strong showings in 2018 (the tax cut still working its way through). The second is that we do not expect this weakness to span into the next couple of quarters, with positive year-over-year growth expected in 2020. Finally, Q3 earnings may not ultimately be as weak as expected. It’s early days, but this week saw solid reports from some of the U.S.’s most key banks and health care companies. UnitedHealth Group, Johnson & Johnson, JPMorgan Chase, and Citigroup all reported strong earnings that added a shot of early optimism into earnings season.2
How Can You Prepare for Retirement Uncertainties?
There are so many unknowns that come with planning your retirement – what if the market crashes or a medical emergency arises? No one can predict if these what-ifs will materialize—but there are simple steps you can take NOW to help ensure your secure and comfortable retirement.
Get our practical advice that is based on decades of experience and can potentially guard your retirement assets against the “what ifs” in life, including:
- How to counteract the effects of rising inflation
- Ideas to allocate your assets to defend against a correction or crash
- Strategies to deal with financial emergencies without liquidating investments
- Tax planning ideas to help avoid unpleasant surprises
- Plus more ways to help protect yourself and your family against retirement unknowns
If you have $500,000 or more to invest, download our Retirement Uncertainties…and How to Breeze Through.3
Is “Phase 1” of the U.S.-China Deal Already Falling Apart? Just last week, markets were given a confidence booster with the announcement of “phase 1” of a trade deal between the U.S. and China. What was billed as the foundation for a broader trade deal, upon further scrutiny, revealed that there were only minor concessions and promises of delayed tariffs (U.S.) and additional agricultural purchases (China). It turns out that China’s purported $50 billion of agricultural purchases – which is higher than China has historically spent – is based on conditions that the U.S. drops plans to add 15% on $156 billion of consumer goods starting on December 15. China also indicated that its agricultural spend would actually hinge on demand and market prices, which means they may have $50 billion to spend but may not ultimately go that high. Complicating matters further, the House of Representatives recently passed a bill supporting protestors in Hong Kong, 4 which could end up irritating China.
Is the Brexit Breakthrough Real? Markets were pleasantly surprised on Thursday to learn that Britain and European Union negotiators had reached an agreement on Brexit. Early indications show that a resolution was reached on the border between Ireland and Northern Ireland, which to-date had been one of the thorniest issues in negotiations. But opposition leaders are already claiming that the new Brexit deal is worse than the deal Theresa May had reached months before, and the terms and text of the deal are still subject to British Parliamentary vote, which is all but assured. It was encouraging to see two sides that were seemingly very far apart – Boris Johnson vs. EU leaders – manage to arrive at a negotiated agreement.5 Now the hard part begins.
Are Weak September Retail Sales Figures a Sign of Recession? As weak manufacturing data and negative corporate earnings in Q3 have alerted many investors to recession possibility, matters were made worse this week with softening retail sales. The Commerce Department stated on Wednesday that retail sales fell -0.3% in September as households cut spending on online purchases, cars, and building materials. The core figures correspond to overall consumer spending in the United States, which accounts for the largest share of the U.S. economy. But investors can temper their nervousness for two reasons: 1) monthly data are volatile, and we would want to see a pattern of weak spending before raising red flags; and, 2) the core figure does not include most services spending, which is where a majority of U.S. consumer dollars go.6
Just as we cannot predict exactly when the next recession will be or how these stories will pan out, we also cannot predict life’s uncertainties when it comes to retirement planning. No matter how carefully you prepare for retirement, life’s unknowns can throw your plans off track.
- The effects of inflation could diminish the real value of your nest egg
- A stock market correction or crash may cause your net worth to plummet
- Changes in your personal situation—such as a health emergency—could have an enormous impact on retirement.
But you can take steps to prepare yourself and help protect your secure and comfortable retirement.
If you have $500,000 or more to invest, get our free guide, Retirement Uncertainties…and How to Breeze Through Them.7 It provides advice, based on our decades of experience, that we believe can help ensure that your golden years will be comfortable and secure.
2 The Wall Street Journal, October 15, 2019. https://www.wsj.com/articles/u-k-pound-posts-gains-on-brexit-optimism-11571130220?mod=djem10point
3 ZIM may amend or rescind the “Retirement Uncertainties…and How to Breeze Through Them” guide for any reason and at ZIM’s discretion.
4 The Wall Street Journal, October 16, 2019. https://www.wsj.com/articles/despite-trade-truce-u-s-china-cold-war-edges-closer-11571227090
5 The Wall Street Journal, October 17, 2019. https://www.wsj.com/articles/brexit-talks-are-dealt-a-blow-as-northern-irish-party-rejects-draft-11571294766?mod=hp_lead_pos1
6 The Wall Street Journal, October 16, 2019. https://www.wsj.com/articles/u-s-retail-sales-fell-in-september-11571229234?mod=djem10point
7 ZIM may amend or rescind the “Retirement Uncertainties…and How to Breeze Through Them” guide for any reason and at ZIM’s discretion.
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.