The Principle of the Deal
Gather ye rosebuds while ye may, it’s trade deal party time in the USA!
The U.S. and China have reached a “phase 1” trade deal … in principle.
The details have been thin since the deal (in principle) was announced yesterday. There are, however, two key points that have made the rounds on the major financial news networks. First, the December 15 tariff hike is off, and existing tariffs will be cut in half. Second, China agreed to purchase billions in U.S. agricultural products.
More details are sure to emerge once President Trump and China sign the deal. That’s right — neither side has actually signed the deal yet. But that small detail hasn’t stopped Wall Street from surging toward fresh all-time highs.
Until next week, I’m going to hold my thoughts on the trade deal (in principle) … and what comes after. For now, I’m returning to Kentucky after attending the Banyan Hill Christmas party last night. (That party was off the hook!)
Before I go, I’ve pulled together some hot takes on today’s biggest stories.
So, without any further ado:
- My Name Is Mud: Adobe Inc. (Nasdaq: ADBE) easily blew past Wall Street’s fourth-quarter targets last night. The creative-software behemoth saw both sales and earnings rise more than 20% year over year, with revenue hitting a record $2.97 billion. What’s more, Adobe also put current-quarter guidance above analyst estimates.
- Didn’t See That Coming: Oracle Corp. (NYSE: ORCL) proved that not all big software companies are created equal. The cloud software specialist bested analysts’ second-quarter earnings targets by $0.10 per share, but came up shy on revenue.
- In fact, it was the sixth quarter in a row that Oracle reported year-over-year sales growth of 0.5% or less. Naturally, investors are starting to get a bit worried, and ORCL shares are struggling today as a result.
- Risk, What Risk?: Now that the U.S. and China have a trade deal (in principle) and Brexit is a sure thing, what’s an investor to do? Why, “back up the truck and buy, buy, buy,” says Chris Rupkey, chief financial economist at MUFG Union Bank.
- Rupkey’s note to clients sounds like a bullish dreamland, replete with phrases such as: “All over the world, markets are falling love. Buy it. Buy it all,” and “Take risk off the table as a concern to be hedged. There is no risk. Bet on it.”
- Personally, I’m in awe of this guy right now. I can’t decide if he’s the devil or my spirit animal. I mean, to stare the U.S.-China trade deal (in principle) and Brexit in the face and declare: “There is no risk” … that takes some guts. That takes a whole truckload of chutzpah. So, here’s to you, Mr. “Back up the truck and buy, buy, buy!” I hope you’re right.
That’s it for today … I’m saving my best rants and insights for next week, when I have more time (gotta see a man about a plane) and more information on the U.S.-China trade deal (in principle).
Until next time, good trading!
Great Stuff Managing Editor, Banyan Hill Publishing