Markets Ignore Impeachment, Coronavirus Spreads, Job Openings Down
In this week’s Steady Investor, we look at key stories and the questions surrounding their market impact such as:
- How will impeachment trials affect the markets?
- Is this a new front for the Trade War?
- Job openings in the U.S. on the decline
- What do we know about the Coronavirus Outbreak?
Markets Largely Ignore Impeachment Trial – As the impeachment trial got underway in the Senate this week, the equity market continued to tick higher. The market’s ambivalence to the impeachment proceedings comes as little surprise – during Bill Clinton’s presidency, from the start of Congress’ impeachment inquiry to actual impeachment, the S&P 500 went up +23%. In the twelve months that followed the Senate’s acquittal of Clinton, the S&P 500 went up an additional +19%.1 A similar pattern has emerged during President Trump’s impeachment, with the market rallying through the House proceedings and now remaining largely stable as the Senate takes up the matter. The conclusion for investors, in our view, is not necessarily that impeachments are meaningless for markets – political outcomes do matter. But once the information is known and the equity market can “price-in” the outcome (in this case, near-certain acquittal for President Trump), then there is not much room for positive or negative surprises – which are ultimately what move markets in the short term, in our view.
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Coronavirus Outbreak Continues to Grow – Headlines were jittery this week, with growing reports of patients affected with the coronavirus. The virus originated in the highly-populated city of Wuhan, China, which also serves as a major travel hub for Southeast Asia. As of this writing, there are over 500 confirmed cases of the virus with 17 reported deaths, numbers that are likely to grow in the coming days and weeks. The spread of the virus comes at a very inopportune time, in that many Chinese nationals are set to travel for the Lunar New Year holiday, which spans from seven days to up to an entire month. Many market-watchers were reminded of the SARS outbreak back in 2002, which also overlapped with the Lunar New Year holiday and killed 774 globally after it first appeared in southern China.4 The global health system is more sophisticated today than it was in 2002, so we should expect to see more effective containment of the virus’s spread. Though time will tell. In the meantime, China has halted outbound flights and trains in Wuhan, as well as shutting down public transportation and putting the city on lockdown. But we expect the problem to get worse before it gets better.
New Front for the Trade War? Just days after the US signed a Phase 1 trade deal with China, the Trump Administration hinted that it may have a new front for the trade war: Europe. The root of the budding trade dispute with Europe centers around a “digital tax,” a 3% levy on American tech companies earning revenue in France. The issue had taken broader appeal once the European commission had unveiled a proposal for taxing US tech companies across the 28-nation European Union, a move that the Trump administration warned would result in tariffs on European goods.5 A trade war with Europe would bring a far wider range of goods into play, since the US exports three times more to the European Union than it does to China. With the European Union already posting feeble growth amid rising political uncertainty, however, US tariffs would surely sting at a vulnerable time.
Job Openings in the U.S. on the Decline – the US economy continues to add new jobs at a steady pace, but many employers are citing labor shortages as a reason for waning demand to fill new positions. According to the Labor Department, job openings fell 10.8% in November from a year earlier, which marks the 6th consecutive month of annual declines.6 To be sure, the number of available jobs in the US still outnumbers the unemployed workers in America, so anyone who wants a job in the US can get one. But declining job openings could be a precursor to slower business investment and growth.
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 7% of their respective classes according to Morningstar (as of 12/31/19).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.
2 ZIM may amend or rescind the “Dean’s List of Investment Strategies” guide for any reason and at ZIM’s discretion.
3 These rankings may not be representative of any one client’s experience. In addition, they are not indicative of future performance
4 The Wall Street Journal, January 22, 2020. https://www.wsj.com/articles/china-virus-cases-pass-400-11579670877?mod=hp_lead_pos5
5 The New York Times, January 22, 2020. https://www.nytimes.com/2020/01/22/business/france-us-digital-tax.html
6 The Wall Street Journal, January 17, 2020. https://www.wsj.com/articles/u-s-industrial-production-fell-0-3-in-december-11579270662
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
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.
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