Latest Business News

Courtesy of AskTraders

 

2020 — FISCAL STIMULUS, THE NEW KID ON THE BLOCK

As the financial markets approach year-end, many are scaling up preparations for 2020 investment strategies. One recently released report from Aberdeen Standard Investments (ASI) offers the views of Andrew Milligan, its Head of Global Strategy. Milligan and ASI offer the argument that the coming year will bear many of the characteristics of the closing one.

It’s always prudent to remember that “past performance is no guarantee of future results.”The ASI report isn’t necessarily predicting another 30% gains in equity markets (SPX500 YTD + 29.24%) over the next 12 months — although this could be one of the ‘outlier’ results to the upside.

The more pertinent point made by the report is that 2020 may look very similar to 2019. The rolling over into the next decade holds psychological importance, but there are currently few triggers in place likely to cause any dramatic change and a lot of those risk factors are already known. The US-China trade dispute is the most important driver of the global economy and other political tensions remain. There is one new factor to consider. Fiscal stimulus looks set to be a buzz word for 2020.

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AUTO INDUSTRY — ESTABLISHED MANUFACTURER SALES SHRINK AS BARRIERS TO ENTRY COME TUMBLING DOWN

 

The auto sector was once a place of relative certainty and stability, if somewhat limited in terms of potential returns. Technological and societal changes have shaken the sector to the core. As barriers to entry have come tumbling down, incumbents and disruptors have engaged in fierce competition for dwindling sales. Not only do they face shrinking consumer demand but also increasing and unpredictable regulatory conditions.

A report by Fitch Ratings has compiled the latest data on new car sales and the preliminary figures for 2019 don’t look good. Global car sales are expected to experience their steepest year-on-year decline since the financial crisis of 2008. The estimated 3.1 million fewer unit sales are a sign of slowing consumer demand from the US to China and pretty much everywhere else in between.

Using data provided by the International Organization of Motor Vehicle Manufacturers has allowed Fitch Rating to unearth a worrying trend in auto consumer demand. Between 2017 and 2018, global passenger car sales fell from 81.8 million to 80.6 million. In the subsequent 12 months the contraction in demand was exacerbated. Sales are expected to fall between 2018–2019 by another 4% to around 77.5 million new vehicle sales.

Brian Coulton, chief economist at Fitch Ratings, said in a statement: “the car sales picture is turning out a lot worse than we expected back in May.”

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2020 VISION — THE BEST PERFORMING STOCKS AND SECTORS OF THE DECADE ARE CONFIRMED

 

Looking in the rear-view mirror might not necessarily help those looking to navigate the financial markets of the future. But then again, as information goes, back data is as useful a tool as is available. The passage into a new decade provides a timely opportunity to analyse which trends have brought about the greatest profits. There is no reason to suggest the winners of the last decade will be the winners of the next, but there may be some juice left in the now identifiable trends.

Industry site MarketWatch calculates that the S&P 500 index, which includes the 500 US-listed firms with the largest market capitalisation, is over a 10-year period posting a net return of 244%. This includes reinvested dividend and represents an annual compound interest of 13.2%. The years 2009–2019 proved particularly fruitful for equity investors.

The last 10 years have seen equities perform better than the long-term average. Another trend is that the strength has also been concentrated in US stocks. Interestingly the valuation of equities on a traditional price to earnings (p/e) ratio does suggest the outperformance is not all hot air.

The S&P 500 price to earnings ratio was 17.6 in 2010 and whilst that multiple has crept up to approximately 21, it has managed to keep pace with equity prices 10 years later. Corporate earnings have blossomed as the aftershocks of the great financial crisis of 2008 have subsided.

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