Your November Monthly Market Commentary
As many of us began our annual tradition of eating, traveling, and spending time with the family, the stock market embraced the holiday season and reached all-time highs—yet again. November also included some major news in the financial services space along with some highly anticipated product launches and announcements in other sectors. As you watch your favorite holiday movies (my vote is for Elf), sit back and catch up on some highlights from November.
A Harvest of Headlines
As the financial services industry continues to evolve, November included headlines from traditional financial power players and major tech companies looking to get in the game. Here are a handful that grabbed headlines.
• Schwab to acquire TD Ameritrade. The retail brokerage business has evolved over the last several years as new entrants significantly pressured traditional firms. Some experts believe that Charles Schwab Corporation’s acquisition of TD Ameritrade provides the additional scale needed to thrive in the current low/no-fee environment. The all-stock deal is set to close in the second half of next year, but may be subject to regulatory scrutiny related to antitrust concerns .
• PayPal to acquire Honey. Recently, PayPal announced its largest ever acquisition when it agreed to purchase e-coupon app Honey for $4 billion. PayPal hopes that the deal-finding technology will help it reach new consumers and those in a different stage of their “shopping journey.”
• Google gets into banking. Earlier this year, Apple® made noise when they launched a credit card in partnership with Goldman Sachs—but this time Google made a splash when they announced their intention to offer checking accounts next year . Google indicated they intend to partner with Citigroup and Stanford Federal Credit Union rather than becoming a bank themselves.
• Attention on Apple® Card. Speaking of the Apple Card, it received some not so positive publicity last month when it was accused of gender discrimination in its credit decisions. Besides tweets and news headlines, the accusations garnered the attention of presidential hopeful Elizabeth Warren. Whether the accusations are true or not, it may be worth watching to see how they impact the adoption of the new product.
• Facebook expands payment services. Facebook already has a payment service with Messenger but introduced Facebook pay last month, which is intended to eventually work across Facebook, Messenger, Instagram, and WhatsApp experiences. It is important to note that this differs from Libra, but provides Facebook with the opportunity to have additional consistency among apps and leverage transaction data for ads.
One Launch and Another Announcement
Over 10 million people signed up for Disney+ on its first day to binge watch Boy Meets World and Star Wars (okay, maybe that was just me). The first day sign-ups exceeded expectations, but it will be important to understand how many users signed up for free via partnerships vs. how many are annual subscriptions to understand the longer term impact of the service.
Additionally, Tesla made news last month when they unveiled the Cybertruck. The “bulletproof” glass did not quite deliver, but Elon Musk announced that there have been 200,000 preorders . There was also a video released by Musk that showed a tug of war between his newest truck and the classic Ford F-150. Musk seems to be taking aim at the highly profitable lines of traditional car companies, and it will be interesting to see if the sleek, electric truck can take on the incumbents from both a demand and production perspective.
Keep an eye on…
• The streaming war. Consumers have plenty of options. Disney+, Netflix, Hulu, Amazon Prime, HBO Max, Apple TV+, and future offerings from legacy players such as NBC Universal are all competing for your screens and wallets. Keep an eye on how many services consumers will pay for and how this may impact the future of streaming services. The idea that a win for one provider is a loss for another might not hold true, as recent research has shown that Netflix users are more likely to subscribe to Disney+ than other households.
• The impact of streaming services on your budget. Some consumers leverage streaming services to complement their cable subscription, while others cut the cord and use them as an alternative. With all the various options and relatively low monthly fees, it’s easy to pile up subscription services. Unused or under-used subscriptions are one common way to clean up your budget for the new year. Before signing up for another streaming service, make sure it is worth it and ditch any wasted subscriptions in your budget. One tool that put this in perspective for me was included in this article .
• The battle for pickup trucks. Morgan Stanley estimated that Ford can thank its F-series for 90% of their global profits , so this is an important battleground between Tesla and traditional car companies. Can Tesla manufacture Cybertrucks at scale? Will existing truck buyers be willing to adopt a futuristic look? Will the incumbents deliver on battery-powered pickup trucks of their own in 2021 as planned? These are the questions worth keeping an eye on for the next couple of years as this battle heats up.
Bump Path to a Trade Deal
In last month’s commentary, we highlighted the progress between the U.S. and China as they agreed to a phased trade deal. November seemed to be a smooth month from a geopolitical perspective until President Trump signed the Hong Kong Human Rights and Democracy Act of 2019. Reports indicate that this act stalled trade negotiations with China and that phase one might not be solidified until “year-end at the earliest .”
On one hand, investors may view this development as the latest-down in the seesaw relationship between the two countries for the last several years. On the other hand, this may provide President Trump additional political cover to back down on tariffs to secure phase one of the deal. Only time will tell, so keep an eye on the progress between the two nations.
The More You Know…
With all the negative headlines and seemingly endless calls for a recession, a common question newer investors ask is if they should invest their extra cash all at once or invest it over time. Morningstar Inc. released a research report that sheds some light on that decision. They found that over a ten-year period, investing over time would result in less money than investing it all at once nine out of 10 times.
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