Longhorn Investment Team Weekly Insight: November 15th, 2019

With a few weeks left of 2019, the S&P 500 is up 23% and on track for the best annual return since 2013. This is on top of encouraging news from Fed Chair Powell, who testified before the House Budget Committee, saying that the economy will continue to grow moderately as trade uncertainty will continue to resolve and that the labor market remains strong. Additionally, there was so much news that came out this week, but this report’s going to focus on the news our students analyzed this week.

Here’s a quick market check-up from Friday:

S&P 500 (^GSPC): +0.77%, or 23.73 points

Dow (^DJI): +0.8%, or 222.18 points

Nasdaq (^IXIC): +0.73%, or 61.81 points

And so, what was our biggest news of the week?


U.S. China trade talks stall over agriculture and IP

To recap, Trump put tariffs on more than $500 billion in Chinese goods, while Beijing has put duties on about $110 billion in American productsCurrently, China hesitating to commit to a specific amount of agricultural products, despite Trump claiming the country agreed to buy $50b in US farm goods. White House economic advisor Larry Kudlow told CNBC Tuesday that no tariffs will be adjusted until a deal is reached, and as of right now, progress is being based regarding “IP theft, financial services, currency stability, commodities and agriculture.” Although trade talks stalling might be worrisome to investors, a long-term hope for a resolution continues to exist amongst investors.

Also worth noting…


10-year Treasury note yield fell

China actually buys a lot of our bonds, and they own about $1.1t of our debt. This week, demand from China fell as trade talks falter. This is on top of China’s economy weakening due to increased inflation and output, as well as decreased consumption. That doesn’t bode well for the yield curve, which we discussed last week, as an inverted yield curve (short-term yields are higher than long-term ones) tends to signal recession as interest rates start to reduce with the assumption that long-term income will continue to fall.

Speaking of debt…


Household debt and auto loans

This week, household debt nearly reached nearly $14 trillion dollars. This is part due to mortgage, student, and auto debt soaring this quarter, as people took advantage of recent low-interest rate environments (in part due to Fed’s rate adjustment). There may be some room for concern, as fear of a recession may make many families hurt with increased interest rates in the future.

More on consumers…


Producer Inflation and Higher Healthcare Costs

This week, the producer price index for final demand rose 0.4% last month. The government reported on Wednesday that consumer prices rose solidly in October amid large gains in healthcare costs and prices of used cars and trucks. This is on top of the report from the Labor Department on Thursday showed healthcare costs accelerated last month, with the cost of outpatient care at hospitals posting its largest rise since 2009. The jump in healthcare prices mirrored gains reported in October’s consumer price index report on Wednesday.


Now this week, with so much news regarding the stock market, I thought I’d rapid fire through a bunch of note-worthy events in a segment I’d like to call…


Here we go!


Walmart stock trading at a record high

  • Earnings beat by 7 cents
  • Sales expectations were beat by 1%
  • E-commerce expectations beat 4%
  • Operating income soared despite lower merchandise prices and heavy infrastructure investments
  • Sales in China were much higher than expected – they rose 3.7%
  • Outlook is high with the holiday shopping season among us

Alibaba and Single’s Day

  • Alibaba’s stock soared as Single’s Day (11/11) saw a record number of sales broken
  • Over $38.3 billion of merchandise was sold on the website
    • That is now the record for most amount of merchandise sold in 24 hours
    • CEO Jack Ma was underwhelmed as he said the sales would have been even more if the weather wasn’t hot and the event wasn’t on a weekday

Disney continues to be on the rise

  • Disney+ came out this week and saw its market value ($268b) reach twice of Netflix’s
  • 10m customers subscribed to Disney+ and their shares rose 7.4%

Cisco’s disappointing earnings

  • Cisco beat earnings last quarter but projected [5%] lower revenues in the future
  • The CFO said that “large businesses were putting purchases through more review processes, meaning orders were taking longer to get done.”

Apple Card’s bias

  • Shocking revelation that rates and credit limit are worse for women compared to men
  • Warren calls for Apple’s transparency in algorithm

Google wants a part in the financial services 

  • Google wants to offer “smart checking” accounts to users
  • This is on top of Goldman Sach’s partnership to create a product for Android Pay that rivals Apple Card
  • This is a move made after seeing Amazon, Facebook, Uber, and Apple create new payment methods and credit cards
  • “They’re all competing for consumer attention and for their ecosystem and platform to win,” Bain and Co partner says.

Google’s in trouble with Nightingale

  • Google is working with Ascension, a Catholic health care system, to build a healthcare related product that has access to millions of patient records
  • Worry of HIPAA compliancy led to a federal inquiry
  • It is worth noting that there’s a lot of Google news but Alphabet’s stock is rising since the sum of the parts is greater than the whole.

Cannabis disappoints

  • Canopy Growth Corp. shares slid more than 17% and overall weed stocks posted much lower earnings compared to expectations, proof that the sector is troubled overall
    • Smith Falls, Ontario-based Canopy  posted a loss of C$374.6 million ($282.4 million), or C$1.08 a share, in the quarter

Tesla in Germany

  • Tesla about to reach Model 3 target production output with new Berlin factory they announced this week


That’s all for now! Thank you so much for reading this week’s weekly insight, and make sure to subscribe for more weekly updates, and follow us on Facebook, Instagram, or LinkedIn!