MTS Insights

A new Chinese economy has been a looming threat over the past few years. It has slowly drifted away towards the accelerated, variable pace of an emerging market economy to move towards a mature service based economy centered around consumption. In the World Bank's China Economic Update for December 2018. The economic data in the report shows how the change is progressing and how its reacting to the current trade dispute with the United States. The most troubling aspect of the shift is the slowing of Chinese GDP despite the gradual pace. The Chinese government already projected lower numbers for the 2019 year, but the World Bank report shows that this is no sudden adjustment. "GDP growth slowed to 6.5 year-over-year in the third quarter from 6.8 percent year-over-year in the first half of 2018 and 6.9 percent in 2017," as mentioned in the report. An interesting aspect of the slowing GDP is that the deceleration is mostly caused by lower exports. Net exports weighe...

President Trump's protectionist trade policies have been one of his more contentious economic policies garnering resistance from critics of all political leanings. The tariff dispute between the United States and China is the most well-known consequence of these policies and has resulted in economic growth worries. The U.S. stock market sat on the brink of a full-on bear market at the end of 2018 but recovered sharply in the first two months of 2019. Observers continue to monitor negotiations between top U.S and Chinese conveys that have yet to produce a decisive trade agreement. Soybean and corn farmers are two groups within those observers that are watching closely in hopes of seeing their markets improve. According to Reuters , USDA Chief Economist Robert Johansson reported that “under the trade dispute, exports to China alone have plummeted by 22 million tonnes, or over 90 percent.” The dramatic reduction in Chinese exports so far has weighed on the latest 2019 projectio...

Sometimes, history does repeat itself. However, three years in front of 2015, the economy faces the triple threat of high valuations, rising rates, and geopolitical trade tensions. First Trust Portfolio 's comparison suggests the pattern could be bullish. After all, a correction happens every 18 months shedding on average 10-19%. A little deja vu might help to calm things down, but this time fundamental pressure feels heavier. 

The jobs report came out for July 2018, and the numbers disappointed expectations. Employment rose by 157,000, below the consensus estimates of about 190,000 for the month of July. Despite lower gains, the unemployment rate continued to fall to 3.9 percent. Total unemployed individuals fell by 284,000 and about 9,000 joined the civilian labor force for the month. More specific breakdowns  include a slightly higher reduction in the unemployment of older males than the rest of the demographics. Adult males (ages 20+) saw their unemployment fall by 0.3 percent while adult women (ages 20+) saw no change in their unemployment. Teenagers (ages 16-19) saw unemployment rise by 0.5 percent being on the weaker end of the report. Broken down by ethnicity, every category saw unemployment tick downward except for Black which saw a slight increase. The Black category is known for having a higher unemployment rate, but it has fallen at the same rate as other ethnicities. This is tru...

Alphabet (GOOGL) released on Monday, July 23rd and surprised the world with a significant beat over earnings estimates. Reported earnings per share was $11.75 beating the Wall St estimate of $9.45 and representing a year-over-year growth in income of 32 percent. Revenue came in much higher as well beating estimates of $25.6 billion by about $600 million. Many thought Google, the main arm of Alphabet, had beat the digital advertising business model to death, and therefore, the company would start to see some slowing in growth. However, that was not the case. MAGNA Global releases data on the global advertising industry and, in particular, releases its seasonal updates of its “MAGNA Advertising Forecasts” that feature many key findings. The latest report was released on June 18th and would have prompted an optimistic view on Alphabet earnings if it had been read before the event. In its latest report, MAGNA forecasted net advertising revenues to be 6.4 percent higher at $551 billion...

Freight and trucking conditions are known for being good barometers of the overall economic health of a country. Freight Transportation Research Associates provides data and reports on the conditions for the trucking and shipping industries. The company provides its Trucking Conditions Index (TCI) which combines analysis on “load volumes, the capacity environment, rates, costs, and the truck driver situation” to give an overall opinion on the industry. The most recent monthly report reports an optimistic picture for the month of May. In 2018, the TCI has suggested that truckers have maintained full capacity utilization with ratings well above the same month a year ago. As the freight season enters its peak, FTR sees “the TCI reading growing further through the calendar year and likely into 2019.” Overall, the reading suggests a continued sense of optimism in the industry despite fuel costs rising. FTR’s truckload rate forecast for the year is reported at 13 percent. The...

Four big banks kicked off earnings season last Friday and this Monday. J.P Morgan (JPM), Citibank (C), Bank of America (BAC), and Wells Fargo (WFC) were all part of the fun that lead to sizeable gains in Monday's trading session. Banks tackled issues such as rising interest rates and trade tensions in conference calls while discussing earnings numbers with investors. Overall, the data show one clear loser and mixed strength from the other three. The clear loser was, and continues to be, Wells Fargo. The bank saw a contraction in all key indicators. An drop of 3 percent in revenue was accompanied by an 8 percent drop in debit and credit card spend, a 2 percent drop in deposits, and a 1 percent drop in loan growth. The only inkling of positivity came from a large drop in nonperforming loans of -19 percent. Despite a poor earnings report, shares of WFC still jumped almost 3 percent on strength in the sector. The remaining three banks each saw their share pric...