Tensions have escalated in North Korea, but what can we expect moving forward? Get the answer to this question and much more in this week’s edition of the Steady Investor’s Week.
Breakthrough in Brexit Negotiations? – one of the biggest sticking points in Brexit negotiations (or lack thereof) has been Britain’s reluctance to pay any sort of financial settlement for leaving the European Union. The EU has insisted that there would be no moving forward without Britain agreeing to pay up to $60 billion for projects agreed upon while membership was still in force. For some time, Britain had taken a hard line on this issue, saying that even a single euro would be too much to pay. But the tides appear to have turned, Britain said late last week that they are prepared to pay up to 40 billion euros as part of a deal to leave the EU, on the condition that the bloc accepts the financial settlement as part of a broader deal on future relations, including a trade pact. It feels as though Britain may be trying to buy their way back into the single market when it comes to trade – this could be a smart approach.
3 Reasons Not to Over-worry about North Korea – tensions have clearly escalated over the last few weeks with North Korea. From their first test of an intercontinental ballistic missile to reports that their nuclear program is advancing more quickly than previously anticipated to President Trump’s hard line remarks about “fire and fury” in response to further threats from the regime – there has been no shortage of posturing from both sides. The latest intelligence reports this week suggest that North Korea has successfully developed a “miniaturized nuclear weapon” and has “up to 60 nuclear weapons” in its arsenal. A threat to U.S. military base Guam has been levied. None of this news feels or sounds good, and some investors may be on high alert – which is perfectly understandable. But in our view, none of these recent actions should translate into changes to asset allocation or outlook. Here are three reasons why:
- The United States has been issuing threats (both vague and explicit) against North Korea for the better part of 15 years, and North Korea has been doing the same. The threat of war is not new to the Trump Administration, either – the George W. Bush and Barack Obama administrations both threatened war as well.
- No side has any incentive to escalate, and it is pretty well known that all sides (even China and Russia) understand this. North Korea knows launching an attack is the equivalent of suicide, and the United States’ knows that a pre-emptive attack would almost certainly bring calamity to a neighbor ally, like South Korea or Japan.
- All the North Korea regime cares about is staying in power, and the only way to do so is to stand down and continue issuing empty threats. We expect them to do just that.
Earnings Roundup – with results from 350 S&P 500 members already out, total earnings are up +11% from the same period last year on +5.9% higher revenues, with 74% beating EPS estimates and 68% beating revenue estimates. The fact that companies are easily beating Q2 estimates on a broad basis – even though estimates hadn’t fallen by that much ahead of earnings season – is a notable positive that needs to be acknowledged. For Q2 as a whole, combining the actual results with estimates for the still-to-come companies, total earnings are expected to be up +9.7% from the same period last year on +5.4% higher revenues. This would be coming after +13.6% earnings growth on +7% higher revenues in Q1. While the Q2 earnings growth pace represents a deceleration from the prior quarter’s level, total earnings for the quarter are on track to reach a new all-time quarterly record:
Even as history shows us that we do not need to over-worry about recent events in North Korea, it is still easy for many investors to speculate and create excessive worry about how recent events could impact the market moving forward. Instead of worrying about what is out of your control, try to focus on the long-term, ensure you’re diversified and balance your investments according to your time horizon for tapping into your portfolio. Additionally, finding an investment strategy that meets your needs can help you plan for the long-term. Today, we would like to offer you a sneak peek into our top performing strategies with our guide, “4 Reasons a Dividend Stock Strategy May Make Sense for You.” This guide can offer you some insight into how a dividend strategy could meet your investment needs. Simply click on the link below to get your free copy today. And to learn more about Zacks Investment Management and our proven track record for success, call us at 1-888-600-2783