About 90% done

By Hoda Mehr Thu, Jun 27, 2019

What you need to know?

In an interview with CNBC,Treasury Secretary Steven Mnuchin told CNBC that the trade talks between the U.S. and China are going very well and he is optimistic about the outcome, going into the weekend discussions between the heads of the two countries. That’s excellent news. But why are we not popping the champagne yet? Well, what’s in that 10% of the conversation that is still left on the table?

What does it mean for investors?

What scares investors is almost always the uncertainties. We can have 90% of the issues sorted out, but the unclear 10% is what worries the market. Not to say that the stock market is going to crash, but we have yet tp see the good news reported by the secretary of the treasury make any impact on the stock market. A little bit of uncertainty goes a long way when it comes to the sentiment in the stock market.

• U.S. markets: The S&P 500 index declined slightly again, representing four consecutive days of decline. The Dow did not leave its sister index alone and followed the declining trend. See the Overall Market section to read more about what happened. 
• Cryptocurrency: While the stock market is moving slightly down, the crypto market is raging upward. The price of a Bitcoin passed the $13,000 mark on Wednesday. Maybe another crypto bubble is forming?

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What happened on Wednesday?

Utilities, Consumer Defensive, and Healthcare sectors each declined more than 1% on Wednesday, and that was enough to drag the overall market lower. The S&P 500 index was down by 0.12% and the Dow followed through with 0.04% decline. These are not extreme fluctuations by any means, but one thing for sure, the stock market is not firing on all cylinders.

Now, what?

Markets not growing rapidly may be a good thing. Rapid growth, while super, exciting is almost always an indicator of overexcitement. You don’t want the overall market to go through a similar pattern that has happened in the cryptocurrency market. While a 249% year-to-date growth in Bitcoin price is exciting, but what goes up that fast, will also fall off the cliff fast. We all went through the crypto roller coaster last year. We don’t want the overall market to follow such rapid fluctuations, as the economy and investors cannot tolerate a roller coaster of such scale. Let’s get rich slowly. Ha?

It’s all about expectations.

On the bus full of stock market investors, especially the more short-term kinds of investors, revenue and earnings expectations are the drivers. A company can have lukewarm performance but still does better than the market’s expectations and gets rewarded. That’s exactly what happened for Micron Technologies (Ticker: MU) on Wednesday. The company’s stock price jumped more than 13% after the revenue and earnings declined less than expected. Despite Huawei’s ban, Micron management talked about resuming shipment to China, and investors could not be happier than that.

Now, What?

Playing the expectations game in the stock market is extremely difficult. You may think that the U.S.-China trade deal is nowhere close to an end and there is no way for the tech companies to recover from the impact, but companies may find a way to move around the obstacles and surprise you. When you invest based on predictions, always be ready for such unexpected results.

Watch out, the drone is falling. 

Shares of the drone-maker, AeroVironment (Ticker: AVAV), fell nearly 9% on Wednesday. There was almost no good news in the company’s quarterly earnings call. Revenue was down, net earnings were down, and the forecast for 2020 was not promising either. No wonder the investors are selling off the stock.

Now, what? 

Unmanned aircraft and drones are the future; in the military, in research, and in farming. Making them work is not an easy task, and not too many companies have the research capacity to make it happen. AeroVironment may not be doing well now, but this is a company heavily focused on research and development, has no long-term debt, and still generates cash. Don’t give up hope too soon. Did you do well in every exam at school?

We’re not feeling it. 

So, what happened? 

Last week, The Fed’s chairman told us the economy is in good shape. We hear politicians talking about how the engine of the economy is humming, and we are 10 years into almost the longest bull market in the U.S. It’s all good and dandy. Right? Well, the American people are not feeling it.

In a survey done by financial information website, Bankrate.com, while the experts rate the state of the economy as either Good or Excellent, only a little bit more than half of the everyday Americans would agree with them.

Someone should ask the experts, what good is it having an excellent economy but people not thriving in it?

About the Author

The authors of this Scoop are the editorial team at Stock Card, led by Hoda Mehr. Hoda Mehr is CEO and Co-founder of Stock Card and the host of Renegade Investors podcast. She runs a community of 40,000 stock market investors and manages Stock Card's successful flagship portfolio, Roll with Our CEO, on Stock Card Portfolio Store. Hoda is an Economist with an MBA from Concordia, John Molson School of Business. She applies behavioral economics, data journalism, and storytelling to all aspects of her work. Before starting Stock Card, Hoda worked as a strategy and insights lead at technology companies including Symantec, Aimia and Sony. Create a free account to do your stock market research easily and mistake-free: Stock Card Stock Card