Why Boredom Is Good For You
Monday Market Recap
Highlights
The Labor Department reported job growth increased by 145,000 missing estimates of 160,000 while the unemployment rate held steady at 3.5%, a 50 year low.
Casper Mattresses is the latest Silicon Valley Unicorn to file for an IPO this year amid losses of $232M over the last 3 years.
Earnings season kicks off this week with Delta, JPMorgan Chase, Blackrock and others reporting throughout the week.
Earnings season begins this week and will be one of the most important indicators determining the continuation of a bull market in 2020. Companies in the S&P 500 are projected to report a 2% decline in earnings in the fourth quarter from the year earlier, according to FactSet. If this does occur, it would mark the fourth straight quarter of declining earnings. This previous stretch was last seen in 2015-2016. Investors however, are expecting a turnaround in profits, mainly due to signs of global stabilization and easing trade tensions between, the US and China. Estimates suggest the S&P 500’s earnings could grow by 9.4% on a year over year basis. Yet there are three risks that could derail this plan.
First, technology decoupling between the U.S. and China is underway and will force countries and businesses to navigate this evolving landscape. Remaining tensions will persist even after the signing of Phase 1 of the trade deal on January 15th.
Second, political polarization is reaching a high point in many countries. The U.S., for example, faces a contentious presidential election with the potential for extremely divergent policy outcomes with lasting repercussions. Globally, a rise in protests, partly fueled by rising income and wealth inequality and facilitated by social media will leave many governments ill-equipped to respond. With limited monetary and fiscal maneuvering room, this could lead to further unrest in any downturn. For instance, as a result of the protests, Hong Kong has entered into its first recession in over a decade, with its economy shrinking 3.2% and expects it to shrink 1.3% for the full year.
Last, cybersecurity and the ability to respond and protect will play an integral role for the US and businesses globally. As we approach the height of an election year coupled with increased tensions with China, Iran, North Korea, and the like, an uptick of “ransomware” attacks against cities and states with relatively poor defenses may be a sign of things to come. Markets look to be complacent about such risks: the attention to cyber attacks has been on a steady decline since late 2017, according to the BGRI. U.S. Treasuries and their inflation-protected peers have done well to cushion portfolios against recent risk selloffs while government bonds in Europe and Japan have diminished ability to serve such as role as their yields near lower bounds.
Chart of the Week
This chart depicts the potential rebound from 4 straight quarters of shrinking profits
Source: WSJ
What I'm Reading –
Face to Face - The Art of Human Connection by Brian Grazer
Brian Grazer takes you behind the scenes on his journey of human connection. Grazer is behind some of the biggest movies we know and love, including A Beautiful Mind, American Gangster, and The Davinci Code. Grazer argues that we are missing an essential piece of the human experience, particularly when burying ourselves into our devices. When we are face to face and able to look another person in the eyes, we can form the types of connections that expand our worldviews, deepen our self-awareness, and ultimately lead ourselves to our greatest achievements and most meaningful moments.
What I’m Listening To-
Why Boredom is Good For You – Yuval Noah Harari
Our inability to deal with boredom is one of our greatest weaknesses, says Yuval Noah Harari. If you are in a conversation and it doesn’t allow space for boredom, it will never fully reach somewhere new. The comfortability with boredom and being disciplined with it is the real journey of exploration. It leads to new connections, experiences, and even a deeper understanding of yourself. Yet we tend to run from boredom. This Harari argues, is the exact opposite of what we should be doing.
Financial Thoughts-
As we enter 2020 and beyond we will see incredible advancements not only in technology, but health as well. Average lifespans are expected to increase from 78 now to over age 90. Instead of 30 year careers, we will see people now with 50 -60 year careers. This will have lasting repercussions on the way we look at retirement and our current careers.
Increasingly workers are extending their retirement past 65 and 70. However what many people haven’t taken into account is the extended lifespan that comes after work. How will you fill your time and how much will you need saved to live a full life? Around 15% of people never intend to retire at all. Just as athletes begin to plan their careers post competition, we should do the same for our own careers. What does your post career look like? Will you pick up new hobbies? Go back to school? Take a sabbatical? Finding your passions now and planning around them is more important than ever and the work starts now.
On This Day January 13, 1930 - First Mickey Mouse Comic Strip Appears
Past 12 Months Performance
As of January 10, 2019
Source: Blackrock
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Sources: BlackRock Investment Institute, MSCI, Citigroup, with data from Refinitiv Datastream, January 2020. Notes: The chart shows quarterly returns for U.S. government bonds (Bloomberg Barclays U.S. Treasury Total Return), TIPS (Bloomberg Barclays U.S. Treasury inflation notes total return index) and equities (MSCI USA Total Return index) in U.S. dollar terms during upside inflation shocks and downside growth shocks. The periods for inflation and growth shocks are measured as those quarters during which Citi’s inflation and growth surprise indexes recorded a greater than 1 standard deviation relative to their history. Indexes are unmanaged and not subject to fees.
Chart Source: BlackRock Investment Institute, with data from Refinitiv Datastream. January 2020. Notes: Global stocks are represented by the MSCI ACWI index. Global bonds are represented by the Bloomberg Barclays Global Aggregate Bond Index. Total returns are shown in U.S. dollars. 2020 returns are through January 10, 2020.
Jobs: https://www.cnbc.com/2020/01/10/us-nonfarm-payrolls-december-2019.html
Casper: https://www.forbes.com/sites/sergeiklebnikov/2020/01/10/casper-files-for-ipo-but-warns-it-wont-be-profitable-anytime-soon/#5c3982677c1f
Retirement: https://www.wsj.com/articles/the-end-of-retirement-11578632400
Hong Kong: https://www.bbc.com/news/business-50431614