Twitter report on the fall of monthly active users to 321
million from 330 million, concerns over the US negotiations and the growth of
the global economy on Thursday caused IT, raw materials and materials to drop
by 1.4% and the fuel and energy complex by 2.1%, reduced the main foreign
indices by 0.9%: S & P - up to 2,706.05; Dow 30– up to 25,169.53 points. At
the same time, real estate securities - one of the two leaders of this year
with a result of + 11.4% - continue to go up.
The reason for the fall is in the US commentary about the
lack of chances for the leaders of America and China to meet until March. The
exchange has been waiting for a clearer announcement of the meeting since
December 25 and has regained most of the positions lost on intensifying the
conflict between the two countries since the beginning of October. During this
time, the ETF for IT and discretionary consumption added + 17% in dollars
excluding dividends.
The joy of a part of
sectors was caused by strengthening the patience of the Fed in raising interest
rates. Real estate and housing services were a plus of + 7% and + 6%,
respectively, compared with October. Essentials returned only 1% below the beginning
of October and increased by + 10% from December 25 on fears of a recession,
which was expected among a quarter of Wall Street. The growth of manufactured
goods by + 21% from December 25 is partly due to the increased aggressiveness
of the defense doctrine and the increase in large international orders. But IT,
part of the consumption and fuel and energy sector may be vulnerable.
According to S & P, an increase of + 11% per year in
dollars is likely with chances of 55% after reporting an absolute majority
(about 70%) of disclosed S & P companies. The day before yesterday, it
showed only + 3.6% per annum of total returns including dividends, and today it
is already + 7.0% per annum. This is a lot for one month!
The likelihood of a breakthrough in negotiations with China
is 3% since the specifics on the
implementation of structural reforms and on the implementation of the IP
protection plan in the PRC will be a success, considering that there has been a
plan since 2010 and has been developed since 1994. I do not exclude, with a
probability of 6% -8%, an agreement on royalties of Chinese companies towards
the United States.
Among the risks, for example, the deadline for the Shatdaun
on February 15, on the national debt ceiling on March 1, the possibility of
lowering the US rating is still in force, then the road to the new arms race is
open. The upward movement of the Nasdaq took into account past expectations of
a deal with China and, over time, leads to profit taking as it moves toward the
realization of these undertakings.
Papers capable of growing by 20% are less and less, and
growth in January was clearly part of the leverage, which can choose liquidity
on a number of securities while taking profits. With a probability of 15%, you
need to keep in mind the possibility of a side effect.
With a probability of 3%, a combination of risks is
possible, leading to a decrease of 30%, and with chances of 16% -18%, a drop of
20% is possible.
So, from the baseline forecast for growth of + 11%, we come
to a probabilistic forecast of profitability in the region of + 1.8%, which
says a lot about the risks of decline. My baseline scenario is based on a
unique combination of soft DCT and weak inflation with strong government
support in many industries and suggests that it is not the worst option to
diversify, including through alternative investments.
From positive news, a new, 6th largest bank will soon appear
in the US: BB & T has bought SunTrust and will now change the brand.
Together, BB & T and SunTrust will have $ 442 billion of assets, $ 301
billion of loans, $ 324 billion of deposits. Together, the top 6 US banks
(JPMorganChase, BankofAmerica, WellsFargo, Citigroup, GoldmanSachs, MorganStanley) earned more than $ 120 billion in
2018. This year we can expect about + 11% in dollars from the papers of leading
international investment and credit institutions. Suntrust has already shown
this growth, other banks are not.
The merger, which is expected to close before the end of
2019, if approved by the regulator, is positive both for SunTrust and for the
industry as a whole. In particular, for JP Morgan and BankofAmerica, the
prospects for which we still do not appreciate the best way. The process of
consolidation of the industry represents a certain risk for the positions of
leaders only in the longer term, but it makes sense for active investors to
wait until the exchange assesses the consequences of the news, and by the trend at a more favorable price, when
confirmation of improved business conditions in the form of accelerating
lending rates.
After negative reporting in the insurance industry, the
number of candidates for purchase increases. The S & P life and health
insurance segment is priced at a year-over-year profit forecast at a very
attractive level of 8.0, which was only at the beginning of 2014 and 2016.
MetLife on this indicator is only slightly worse than the average, 8.25, which
is understandable: a company with a high capitalization has a lot of weight in
the sub-index. For this reason, I would rate the paper in the context of the
indicators of the industry as a whole and would look at increasing profits when
determining the potential for improvement.
I think that in the very near future life and health
insurance services will be in demand in America and around the world, and
profit growth of +30% - + 40% per year in this sector will not be the rarest
phenomenon. Against this background, a 5% reduction in the accounting value of
Metlife is fraught with the consumption of capital. But if investors do not
have the opportunity yet to find options for diversification with the help of
other well-known securities of the sector - Aflac, Principal, Prudential, and Unum - then Metlife is a good choice if we
see the growth of the market as a whole. To buy these financial instruments,
like any other, you need, of course, not half a pint, but with knowledge.