A New Warning From a Global Bellwether
Checking in on this critical trend... A new warning from a global bellwether... Why is the Fed so worried?... Have you reserved your spot for our first-ever cannabis event?...
Regular Digest readers know it's one of the most concerning trends we've been following...
In recent months, we've heard a long list of firms warn of slowing sales. These companies span a wide range of industries, and include such global bellwethers as Apple (AAPL), Samsung, Delta Air Lines (DAL), Constellation Brands (STZ), Ford Motor (F), and Intel (INTC), among many others.
But it was the warning from shipping giant FedEx (FDX) that was particularly concerning...
Because the company operates in roughly 220 countries and handles more than 14 million packages each day, it's long been considered one of the best real-time gauges of the global economy.
And as of mid-December, the news was downright ugly. The company noted "significant weakness in business conditions," particularly in Europe, and slashed its outlook for all of 2019.
Well, FedEx reported its fiscal third-quarter earnings after the close on Tuesday...
And unfortunately, the news has not gotten any better since December. As financial news network CNBC reported last night...
A top executive at FedEx is flagging serious concerns in the global economy... "Slowing international macroeconomic conditions and weaker global trade growth trends continue, as seen in the year-over-year decline in our FedEx Express international revenue," Alan B. Graf Jr., FedEx executive vice president and chief financial officer, said in a statement.
FedEx reported weaker-than-expected third-quarter earnings and revenue... and cut its full-year guidance. Shares fell more than 4% in after-hours trading.
Despite a strong U.S. economy, FedEx said its international business weakened during the second quarter, especially in Europe... FedEx shares have dropped roughly 27% in the past year, lagging the XLI industrial ETF's 1% decline.
Speaking of concerning signs...
This afternoon, the Federal Reserve announced its latest policy decision.
As expected, the Fed held interest rates steady again this month. However, the central bank unexpectedly announced that it is now unlikely to raise rates again at all this year. It also said it will start to slow down its balance sheet "runoff" – so-called quantitative tightening ("QT") – in May, and would halt it entirely in September.
Now, officially, the Fed maintained a positive outlook on the economy. And in his post-meeting press conference, Chairman Jerome Powell affirmed that view. "The U.S. economy is in a good place and we will use our monetary policy tools to keep it there," he said.
However, the Fed's actions suggest that's anything but the case today.
Remember, as recently as last fall, the Fed was telling us that there would likely be at least two more rates hikes this year (and several more in 2020), and that QT would continue on "autopilot" for the foreseeable future.
Fast forward a few months... It has now put additional rate hikes on hold for at least a year (and likely permanently) and is ending QT altogether.
We can't help but wonder... If everything is well in the economy, why is the Fed so obviously worried?
In short, stocks have enjoyed a tremendous start to the year so far...
But none of the big fundamental concerns we've been tracking for the past several months has suddenly disappeared.
Data continue to suggest corporate earnings have peaked. And unlike the last "earnings recession" in 2015-2016, this time labor costs have been rising, too... which could further pressure margins.
Meanwhile, the broad markets are as stretched to the upside as any time since last February's "volatility panic." The market is overdue for at least a short-term pullback.
For now, our advice to investors remains the same: Stay long, but stay "hedged" with plenty of cash and a few short sales... And keep a close eye on your trailing stops, just in case.
Of course, this bull market will end eventually...
But even if it ends sooner rather than later, it doesn't mean we won't have opportunities to profit.
For example, as regular readers know, history suggests both commodities and value stocks are likely to do well in the next bear market.
We'd also like to add the burgeoning cannabis industry to the list. The fact is, the best cannabis companies are likely to experience tremendous growth over the next several years, almost regardless of what's going on in the broad markets or the economy.
But if you're planning to invest in this opportunity, you absolutely must know what you're doing.
You see, for every big winner, there are likely to be dozens of losers and "also rans." Investing blindly is a recipe for disaster. That's why we're holding our first-ever Cannabis Investing Event next Wednesday, March 27, at 8 p.m. Eastern time. Click here to learn more and reserve your spot for this FREE event.
New 52-week highs (as of 3/19/19): Ionis Pharmaceuticals (IONS), KLA-Tencor (KLAC), Kinder Morgan (KMI), Microsoft (MSFT), Nestlé (NSRGY), and Wheaton Precious Metals (WPM).
In today's mailbag, we're sharing more feedback on recent Digests from our newest senior analyst, Thomas Carroll... and a criticism of cannabis. As always, send your notes to feedback@stansberryresearch.com.
"Tom, I thought your Digest [on the U.S. health care system] was excellent. I went in for a radical prostatectomy with the surgeon and Leonardo (the DaVinci robot) about 5 weeks ago. I'm not complaining about the outcome. The surgeon did a masterful job, no leaks 3 weeks out. But the cost including anesthesia was in excess of $70,000. I can afford whatever the deductible and co-pay is. But to Porter's point of a Jubilee, I wonder how much of personal debt/bankruptcy is related to healthcare bills? How much do the hospitals have to 'write off' and cost shift to the rest of us? I'll be interested on your take on where we're headed. The thought of a Jubilee would seem to put the healthcare system right in the crosshairs of politicians and be detrimental to the healthcare industry in general. Then again the pharma and healthcare lobby is formidable. I would not have guessed United Health, CIGNA, or Aetna would have been a good investment 8 years ago. Thank you for sharing." – Paid-up Stansberry Alliance member J.L.
"In response to your reader's opinion on PAs/NPs, I wouldn't discount all PAs for a bad experience with one. I've been an Interventional Pain Mgmt. PA for 15 years and have reached the point in my career where a young doc fresh out of school looks to me for advice on caring for our pain patients. Now this doesn't mean I go outside of the scope of my practice in what I do. I inform every patient of their right to see the doc. In the end, they are happy with my care and honesty that some rarely see the doc if it's a case I can handle autonomously. If it's a complicated case, I always suggest the case be discussed with the doc as well. A good midlevel always knows their limits." – Paid-up subscriber Brad M.
"[Your Digest on] sell side analysts [was] well said and very helpful. Makes me even happier to know Stansberry Research wants to provide me the information you would want if our positions were reversed." – Paid-up subscriber Mitchell F.
"Good morning. Wow. Suddenly cannabis is the perfect drug. Too bad smoking it will increase the chance of getting lung cancer." – Paid-up subscriber Jeff K.
Brill comment: While some folks will likely always choose to smoke, we expect most will ultimately use cannabis in other ways. And make no mistake, many of these uses will have absolutely nothing to do with getting "high."
Again, you can learn more about our thoughts on the future of this industry during Stansberry Research's first-ever Cannabis Investing Event next week. Click here to reserve your spot now.
Regards,
Justin Brill
Baltimore, Maryland
March 20, 2019