trade war

Tech Stocks: More Risk For Earnings Season?

We’ve been telling subscribers that we’re cautious on stocks the last few weeks preferring lower exposure. Rising rates and tariff risk to earnings are key headwinds going into earnings season which starts next week.

Trade War Risk About To Hit Earnings?

So far the stock market has generally looked through trade war risk.

That said we’re approaching earnings season and that could change. While the news media can wiggle stocks, earnings are the ultimate driver to stocks.  If tariffs hit earnings reports that drops the E in the PE and likely can hit stocks.

We’re about to lap the tax benefits in early 2018 with tariffs in 2019. That earnings benefit gets lapped with an earnings drag. That could start this earnings season by way of company guidance.

That’s real for the market but we haven’t had to face earnings reality in the market yet for tariffs.

Except for Micron

You heard what Micron said about tariffs on their earnings call in September? It was one of the reasons they dropped guidance for next quarter and the stock dropped with it.

Micron said on tariffs “we’re working on steps to mitigate that. That obviously takes some time….. It’ll be a quarter or two before we start to see some benefit from the improvement there.”

But so far there’s been no let up in the build up of threats between the US and China. Even though Micron said they expect to see benefits in a couple of quarters, we don’t really know. They just dropped margin guidance because of tariffs. We’d guess other tech companies are in the same boat.

Micron Sneak Peak On Earnings Season?

Micron reports in between others and could be a sneak peak. We’re headed to hear how the rest of tech is going to deal with earnings as earnings season starts next week.

Looking For Tech Earnings Home Runs

We spoke to the top tech companies over the last few months to identify what tech stocks have home run earnings potential. Earnings are what drives stocks, especially tech stocks. Finding those few tech stocks that have realistic earnings trajectories way above the Street can give you conviction to see a stock through to big upside. Dip your toe in the water with a free trial.

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All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless.

We have no holdings in the stocks mentioned unless otherwise noted.

Trade War: No News Isn’t Necessarily Good News

The US and China met the last two days to discuss trade. We’d love it if we heard of an imminent joint press conference. Maybe we’d hear some good news.

But so far we haven’t heard such news.

The Tell

Uncharacteristically, President Trump didn’t expect much to come out of this meeting. When Trump has been confident ahead of a meeting he usually comes away with something.

Not expecting much tells you Trump may have used this meeting for posturing which implies we also shouldn’t expect much.

More Pressure To Come?

Our guess is Trump will use the findings of this meeting to further hard-press China.

China’s stock market and economy have been struggling ever since The US applied pressure. Trump probably feels he has the upper hand.

We wouldn’t guess much comes out of this meeting and, if anything, harder US pressure can soon follows. That pressure would likely further risk China’s economy and financial markets and could be a bad news day for US markets.

Looking For Tech Earnings Home Runs

We spoke to the top tech companies over the last few months to identify what tech stocks have home run earnings potential. Earnings are what drives stocks, especially tech stocks. Finding those few tech stocks that have realistic earnings trajectories way above the Street can give you conviction to see a stock through to big upside. Dip your toe in the water with a free trial.

START FREE TRIAL

Read Reviews

All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless.

We have no holdings in the stocks mentioned unless otherwise noted.

Updated Aug 23 4:40 EDT PM, grammar.

Second White House Stock Market Warning This Month

second warning from white house on stock market

The White House has now made two clear stock market warnings in July. President Trump hinted to CNBC that he has wiggle room with stock market gains to take on trade war risk.

It was the beginning of the month that US Commerce Secretary Wilbur Ross made similar warnings.

Trump told CNBC late last week, “This is the time, this is the time, you know the expression we’re playing with the banks money.”

Trump knows casinos and being up on the “house’s money.” He expressed that the stock market being up a lot since his election win affords him some room to take on some trade war risk.

That should be taken as a clear warning of more market risking tweets and decisions coming in the future.

Wilbur Ross said earlier this month the stock market will have some “hickups” thanks to trade and that the “level of the stock market” is not going to affect their trade policy. Trump’s calls last week echo Ross’s warnings.

Sure enough Trump tweeted on Friday that China and the EU are manipulating their currencies. China has been letting their currency drop which has led to global market risk and currency contagion risk in the past.

So far the stock market has taken the warnings in stride but we’re keeping a close eye. For now earnings are what appears to be supporting stock markets. We are bullish on earnings.

Hitting Tech Stock Earnings Home Runs

We spoke to the top tech companies over the last few months to identify what tech stocks have home run earnings potential. Earnings are what drives stocks, especially tech stocks. Finding those few tech stocks that have realistic earnings trajectories way above the Street can give you conviction to see a stock through to big upside. Dip your toe in the water with a free trial.

We’re about to hit our prime time, earnings season.

START FREE TRIAL

Read Reviews

All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless.

We have no holdings in the stocks mentioned unless otherwise noted.

China Will Never Make Reforms Under US Pressure: Global Times

The Global Times, known to be China’s state media outlet had some telling comments.

The title of their latest jab at the US was, “China will never make reforms under US pressure.”

China Admits Needing Reform

I had a couple of questions on that.

They would be ready to make reforms without US pressure?

Is this admitting that they need to make reforms but US pressure is holding them back?

The inference in their headline’s language shows global pressure pinning them to need to make change. But needing to save face they need to do it only in a reduced state of “pressure.”

It Gets Better

At the end of the Global Times post they again hinted confirming the need for such reform.

They said, “US Treasury Secretary Larry Summers got it right when he said that Chinese companies’ leadership in some technologies is not the result of stealing from the US.”

Wait a minute. “Some” technologies are not the result of stealing? They agree with that statement? So that would mean some are the result of stealing?

In that one Global Times message from the state of China, they hint and admit that reform needs to be taken but they need to save face and can’t be pressured.

Trump Negotiation Step Two

As we’ve seen many times President Trump initially puts obscene pressure on his target. He then follows that up with relief and ingratiating consolation to close a deal.

Sounds like we’re headed there.

As soon as Trump enters step two, China will “make reforms [not] under pressure.”

Hitting Tech Stock Earnings Home Runs

We spoke to the top tech companies over the last few months to identify what tech stocks have home run earnings potential. Earnings are what drives stocks, especially tech stocks. Finding those few tech stocks that have realistic earnings trajectories way above the Street can give you conviction to see a stock through to big upside. Dip your toe in the water with a free trial.

We’re about to hit our prime time, earnings season.

START FREE TRIAL

Read Reviews

All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless.

We have no holdings in the stocks mentioned unless otherwise noted.

Who’s Winning The Trade War In One Chart

S&P 500 ETF SPY versus the Hang Seng HSI
Source

Trade war news started escalating in June. You want to know who’s winning the trade war? Click the chart on the left. You’ll see the US’ S&P 500 ETF SPY (NYSEARCA:SPY) versus Hong Kong’s Hang Seng Index (INDEXHANGSENG:HSI).

Many companies based in China trade on The Hang Seng Index.

Since June you can see the huge divergence between U.S. shares and Hong Kong listed shares.

Investors are worried about the outcome for their China-related investments much more than they are their U.S.-related investments.

China Showing A Weak Hand Already

In reaction to some trade concerns China has been letting their debt grow again which is something they were trying to control. Not wanting their economy to slow much they are allowing debt to build.

China has also been letting its currency slip of late. That’s a sign of concern. Past drops of their currency have led to capital outflow from residents further pressuring their currency.

Lower currency may make exports cheaper but too big of a drop can cause regional currency destabilization and contagion risk.

These are some of the many reasons that the high-level charts on the two indices, U.S. and China have diverged. Investors are showing who they think has the strong hand and who has the weak hand.

Hitting Tech Stock Earnings Home Runs

We spoke to the top tech companies over the last few months to identify what tech stocks have home run earnings potential. Earnings are what drives stocks, especially tech stocks. Finding those few tech stocks that have realistic earnings trajectories way above the Street can give you conviction to see a stock through to big upside. Dip your toe in the water with a free trial.

We’re about to hit our prime time, earnings season.

START FREE TRIAL

Read Reviews

All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless.

We have no holdings in the stocks mentioned unless otherwise noted.

Stock Market: Will US-China Trade Talks Resume?

The stock market has been hit on negative trade news days but bounces with a lack of news. Any positive developments could break this market out.

Bloomberg reported that both US and China officials are considering returning to negotiations. A top trade official from China said, “when we have a trade problem we should talk about it.”

China’s economy is probably more at risk to a trade war, their stock market is likely more volatile and President Xi Jinping has more to lose having risen to power thanks to a strong economy.

While President Trump wants to balance trade he also has his sights set on big goals like fixing the problem of China taking technological intellectual property.

With approval ratings moving up President Trump’s voter base probably gives him support to be aggressive. He won votes due in-part to his plans to win back American jobs from China. Trump feels empowered and probably knows China needs to negotiate.

Some advisors in China have recently said China needs to make some concessions. Our guess is something like that doesn’t slip out said within China unless given approval.

The winds are changing potentially where Trump’s momentum of voter support, tax wins, regulatory wins, and North Korea wins drives him to bring China to the table.

Any concessions and agreements would likely be a shock to markets taking us closer to new highs and beyond.

Hitting Tech Stock Earnings Home Runs

We spoke to the top tech companies over the last few months to identify what tech stocks have home run earnings potential. Earnings are what drives stocks, especially tech stocks. Finding those few tech stocks that have realistic earnings trajectories way above the Street can give you conviction to see a stock through to big upside. Dip your toe in the water with a free trial.

We’re about to hit our prime time, earnings season.

START FREE TRIAL

Read Reviews

All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless.

We have no holdings in the stocks mentioned unless otherwise noted.

Tech Stocks: What To Watch In Earnings Season And Trade Wars

Tech Stocks are about to start reporting earnings next week. Fundamental trends should have been strong for Q2 but the question remains will trade fears slow spending in Q3? Which way will guidance go for companies on their earnings calls? We think guidance keeps moving higher but that’s very much in question and we’re looking for clues.

President Trump followed through on upping the ante on tariffs with a new $200B of targeted goods. China has said it would respond which probably occurs when the US tariffs go into effect in the Fall.

Will Q3 Guidance Be Affected By Trade War Concerns?

In the meantime we’re focused on reported earnings which start for, our focus, tech stocks next week. There will be a ton of conjecture if current trade friction slowed demand until we actually hear it in the earnings calls.

We’re collecting clues ahead of those calls.

We’ve said we don’t think that demand trends would have slowed much. If they did they are coming off super-strong Q2 levels. Even if the Q2 pace slows Q3 might still beat Street estimates. That will come out in guidance and that’s really what should matter for the stock action on earnings.

Reporting next week in our universe that will shed some light on trade-war affected demand trends are IBM (NYSE:IBM) and Microsoft (NASDAQ:MSFT).

Netflix (NASDAQ:NFLX) reports Monday after the close but has less exposure to trade friction.

Can The New Secular Dynamic, Enterprise, Offset Trade Concerns?

We’ve been picking up that enterprise customers are starting to spend big for the first time in years. Up until maybe a couple of quarters ago, the majority of the spending growth was led by cloud/hyperscalers like Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL) and Facebook (NASDAQ:FB).

More recently though enterprise customers, traditional companies, are starting to upgrade their tech. There had been a multi-year trend to roll-out usage in the public cloud. More recently though, specifically this year, traditional companies are starting to more aggressively build out their own internal technology infrastructure. It’s an upgrade cycle.

We think that upgrade cycle can benefit many tech stocks this year.

So that’s the Q2 story.

For now we think that trend should be strong enough to have spillover demand into Q3 offsetting any CEO concerns on trade. That’s our guess for now, which could change as we collect data. That Q3 take by companies on their earnings calls will be key in how the stock prices react. That’s what to watch next.

Hitting Tech Stock Earnings Home Runs

We spoke to the top tech companies over the last few months to identify what tech stocks have home run earnings potential. Earnings are what drives stocks, especially tech stocks. Finding those few tech stocks that have realistic earnings trajectories way above the Street can give you conviction to see a stock through to big upside. Dip your toe in the water with a free trial.

We’re about to hit our prime time, earnings season.

START FREE TRIAL

Read Reviews

All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless.

We have no holdings in the stocks mentioned unless otherwise noted.

TSMC Trade War Comments Hint Ahead Of Earnings Season

TSMC’s founder’s comments may have given us a real-time read into the trade war impacts on current business.

We have been bulled up on Q2 tech stock earnings. Since doing the work on our companies though trade war shots could have spooked Q3 company ordering decisions which would change the strong potential Q2 trend.

We don’t think Q3 will be weak but we’re listening for any early evidence of any companies talking about what they’re seeing in Q3. Those Q3 changes can affect the stock prices and sentiment.

TSMC Has Helped Us In The Past

We’ve successfully used TSMC comments to give us conviction ahead of AMD (NASDAQ:AMD) and NVDIA’s (NASDAQ:NDVA) quarters last quarter.

TSMC was just out implying that they see no change in business from the trade war.

Yes they are worried about the risks of the trade war but if you listen carefully to what they said, we’d guess they are not seeing any weakness just yet.

TSMC founder Morris Chang said, “Currently, businesses are not yet actors in this reality show but they could be added into the casting anytime.”

That means to us, in Mr. Chang’s view business has not slowed because of the trade war yet.

He went on to say, “TSMC is still doing well but we need to be on alert.”

That implies to us they are not seeing orders pulled yet in Q3.

Conclusion

Earnings begin to report next week. We want to listen carefully if there’s been any trade war induced slowdown in the tech supply chain.

We’ve said previously that we think the accelerated pace of revenue growth in Q2 could soften any Q3 blow given the trends coming into this trade war were so strong.

On the one hand we’re early and would guess not much trade-war induced slowdown happened. On the other hand we want our ears on the train tracks listening for any change. That can help bias our positioning going into key earnings reports.

Mr. Chang’s “on alert” sounds right.

Hitting Tech Stock Earnings Home Runs

We spoke to the top tech companies over the last few months to identify what tech stocks have home run earnings potential. Earnings are what drives stocks, especially tech stocks. Finding those few tech stocks that have realistic earnings trajectories way above the Street can give you conviction to see a stock through to big upside. Dip your toe in the water with a free trial.

We’re about to hit our prime time, earnings season.

START FREE TRIAL

Read Reviews

All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless.

We have no holdings in the stocks mentioned unless otherwise noted.

Stock Market: Could Trade War News Turn?

The stock market (NYSEARCA:SPY) has bounced back from the last two weeks of trade concerns. That’s pretty impressive strength against negative catalysts.

We see three bright spots that could get this news to turn more positive.

1. Trade War Summer Vacation?

We wrote Friday morning premarket that there’s a chance the negative trade war news could take a summer vacation.

While President Trump has threatened to raise the tariff ante if China responds, The Wall Street Journal reported that new tariffs have some hurdles and “won’t be ready to put into effect until the late fall.”

Since China said they’d only respond to Trump actions, the next actions may not be for another few months. So we may have some quiet news time on tariffs which could be bullish for the stock market.

2. Germany Flinched

While China was trying to cozy up with the EU, Germany appeared ready to drop mutual auto tariffs with the US. That would be a key sign that US trade pressure is working to improve trade relations. While the market’s worried about the negative impacts, The US-Germany news would tell you trade could actually improve.

While North Korea’s not a done deal President Trump did make headway there and it’s possible he also makes headway with another huge topic, global trade.

3. Could China Flinch?

South China Morning Post quoted an advisor to the State Council of China as saying, “Discontent among developed countries at China’s trade practices has been building for years…. China will have to make concessions.”

Hearing that from a government advisor and a local media outlet sounded like a change in tone.

The article quoted another local China expert as saying Chinese President Jinping Xi’s rise to power has benefited from a strong economy. “The legitimacy to rule of the Communist Party was built on economic performance,” he said. “If an economic crisis happened because of the trade war, it would surely damage that legitimacy.”

It’s very possible that while the chances seem slim now, much like Germany, China could also flinch and give the US trade concessions. If it did this market would go nuts to the upside.

Conclusion

The stock market’s been holding up on negative trade war news. The bad news may be about to pass and we could be in a period setting up a better news environment. If so, that would be bullish for the stock market.

Hitting Tech Stock Earnings Home Runs

Above we talked about our top down view. If you’d like to know about our bottoms-up work we have a free trial. We spoke to the top 60-70 tech companies over the last few months to identify what tech stocks have home run earnings stories. Finding those few tech stocks that have realistic earnings trajectories way above the Street can give you conviction to see a stock through to big upside. Dip your toe in the water with a free trial.

We’re about to hit our prime time, earnings season.

START FREE TRIAL


Read Reviews

All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless.

We have no holdings in the stocks mentioned unless otherwise noted.

Stock Market’s Next Move

The stock market has been on a roller-coaster ride the last two weeks but has shown some support. We still see a downtrend but we’re going to let the market tell us what it wants to do next and we’ll tell you what we’re watching.

The S&P 500 ETF SPY (NYSEARCA:SPY) closed yesterday just below June 25th’s open when we turned cautious. That’s when trade war news intensified.  Since then China’s vowed to strike second, not first.

Trade War Summer Vacation?

Looking at the sequence of potential events, striking second could give the market a break from trade concerns for a few months.

This is what The Wall Street Journal said,

“Mr. Trump’s threat to levy tariffs on another $200 billion also won’t be ready to put into effect until the late fall because the U.S. has to clear a number of procedural requirements.”

That can act as good news especially since China said they will not strike first. If China has to wait for the fall for the next round of tariffs this trade war escalation could go on vaca.

So as China answers the current US tariffs, The US will not yet be able to implement the next round until the fall. That would mean that the tariff part of this story could take a break which could be good for markets.

S&P 500 SPY ETF Chart 

SPY ETF Chart levels
Source

We want to watch the stock market to see what it wants to do. For now we think we are still in a downtrend and so don’t want to say the market is turning up until we see it actually turn up.  We also see big resistance overhead as we drew in the chart.

Fundamentally a great case can be made that stocks should go down based on the trade war but so far the stock market is holding up very well.

We don’t want to think we can outsmart the market but rather want to try to understand where it’s going.

Market Action: Putting It All Together

When looking at markets you want to integrate what the market’s saying it wants to do with the news that it’s fed. The fundamentals are one thing but how the market responds to those fundamentals is ultimately what matters. Fundamentals alone don’t drive stock prices. Market participants reaction to those fundamentals drive stock prices.

For example, if shorts don’t see the market go down they’d need to cover which can cause the market to go up on bad news. If it happens that would be a bullish sign of bad news-good action. That would be a case that despite bad news the market couldn’t go down which could cause buying follow through.

For earnings events, the fundamentals are the over-riding driver to stock moves that day which is why we speak to so many tech companies to try and understand an individual company’s most important driver, earnings.

But for markets there are so many influencing factors and investors positioning. We want to understand what the sum total of all of those decisions are saying by watching the trend and reaction to the news.

By watching what the trend is and how the market consumes all that fundamental data you start to see what the market wants to do.

When you get bad news like a trade war and the market doesn’t want to go down, in essence it may be telling you it wants to go the other way, higher.

We’re not there yet. We still see those downtrends and that overhead resistance. But we want to always respect markets and the next few days are critical to see what the market wants to do.

Hitting Tech Stock Earnings Home Runs

Above we talked about our top down view. If you’d like to know about our bottoms-up work we have a free trial. We spoke to the top 60-70 tech companies over the last few months to identify what tech stocks have home run earnings stories. Finding those few tech stocks that have realistic earnings trajectories way above the Street can give you conviction to see a stock through to big upside. Dip your toe in the water with a free trial.

START FREE TRIAL

Read Reviews

All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless. We have no holdings in the stocks mentioned unless otherwise noted.