No rate-cut for you, until 2020

By Hoda Mehr Thu, Jun 20, 2019

What happened yesterday?

The Federal Reserve Chairman, Jerome Powell, broke investors’ heart by announcing no interest rate-cut until 2020, after two days of policy discussions. In his media Q&A, he acknowledged the existence of investment uncertainties and business outlook pessimism due to trade concerns. He also talked about the U.S. having a solid baseline economic performance. He alluded to on-track consumer spending consumption, historically high employment rate, and satisfactory job creation results (using a three-month average). He and his colleagues decided the economy is humming along nicely and there is no additional need for monetary stimulation using an interest rate cut.

What does it mean for investors?

There won’t be a knee-jerk upward reaction in the stock market prices due to interest rate changes. And, the officials have confirmed that the economy is doing as it is expected to do so after 10 years of economic recovery. More than ever before, investors should focus on investing in well-managed companies that have the economic power to weather any potential economic downturn, if the current upward recovery comes to its eventual cyclical trend now that no government monetary rescue in the near-term horizon.

• U.S. markets: The U.S. stock market closed higher than where it started the day. The excitement is partially due to the continuation of U.S. and China trade conversations and the upcoming G20 meeting between the head of the two countries. Interestingly, aside from the usual suspects such as the technology sector, Utilities and Healthcare are the two other sectors that drove the stock market higher today.
• Overall Bond: An interest rate hike or cut aside, Bonds are knowns to be a safe haven for times when the future, especially the near-term future, is murky. Investors continue to park their money in bonds with short-term maturity dates to weather any potential market upheaval in the coming months.

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The stock market has been going up for three straight days 

What happened yesterday?

After a few disappointing days last week, the stock market has been rebounding upward and closed today even higher than where it started in the morning. What drove the market:

• A steady interest rate prospect
• Some positive news about further negotiations between the U.S. and China
• Quite a few noteworthy positive quarterly earnings such as Oracle(ticker: ORCL) and Adobe (Ticker: ADBE)

Does anyone still doubt ROKU? 

Roku (Ticker: ROKU) is up more than 24% in June alone. It wasn’t too long ago that investors rolled their eyes away from the company. Originally, investors perceived that ROKU does not own any “moat” in competition with Netflix, Apple TV, Amazon’s Fire TV and a whole array of all other TV streaming services. However, ROKU has proven that the company is above and beyond what these investors have imagined.

What you need to know about Roku is that TVs (the actual hardware) are getting smarter, but they don’t have a standard operating system. Remember when smart phones were on the raise? Each device manufacurer had its own operating system. Fast forward to today, there are only a few standard oeprationg systems such as Androis and iOS, and they are dominating the idnustry. What Google’s Android is for phones all around the wrokd, Roku is aspiring to be for TVs. Are you still rolling your eyes?

YY Inc. (Ticker: YY) is down despite the rise of most other Chinese ADRs

Share of China’s live streaming platform is down more than 6%. Despite the company’s outstanding performance in its recent quarterly earnings, the announcement of an $860 million public offering of convertible notes has got the investors worried. The company is planning to use parts of these funds to pay for global expansion and infrastructure investments. Today’s price-fall forces the stock’s price into an undervalued range with less than 8X price to earnings ratio.

While the company’s stock price has declined compared to last year, it continues to grow its topline revenue rapidly, and its ownership of several video streaming platforms in China and Southeast Asia is an indicator of strong future growth potential.

Facebook’s world domination plan continues on! The company announced a none for profit consortium of brands, companies, and investors to launch a blockchain-based currency called Libra. This comes amidst an ongoing controversy around Facebook’s trustworthiness with people’s data and information. Despite the concerns, this is good news for the cryptocurrency industry. When a major player such as Facebook puts money into such initiatives, it can be interpreted as a vote of confidence in the future potential of cryptocurrencies.

However, one should not forget that the very nature of having a consortium governing the currency is in direct conflict with the decentralization philosophy of cryptocurrencies. And, while Facebook announced its structure as a none for profit governing body, there is a significant commercial opportunity for Facebook to charge transaction fees when the currency is fully established. Overall, this is a long-term project with huge potential. One thing for sure is that this announcement will further fuel the ongoing privacy concerns and debates.

Brought to you by Hoda Mehr, Editor at Trade Stocks, CEO and Co-founder of Stock Card and the host of Renegade Investors podcast. She runs a community of 8,000 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. Subscribe for free here.

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