The S&P500 index is renewing its historical maximums. All seems to go well but analysts keep mentioning yet another wave of crisis that should have come a year ago; however, falling of the stock indices is postponed all the time. In the end, those traders who accumulated short positions are made to close them, pushing the price up.
Donald Trump has also turned out to be not as simple a person as it seemed before. In 2016, the US economy was growing, and to avoid overheating the Fed was gradually increasing the interest rate. Trump, in his turn, started a trade war with China, trying to get back the business that had left in a search for the cheap labor force.
His choice of time was rather neat. In the situation of the trade war, the US economy kept growing while the economies of other countries got depressed by the actions of the combating parties. When the conflict of the two largest world economies began to influence the GDP growth in the US, the Fed dared to decrease the rates, thus supporting their business.
Other countries do not have such an influence on their economies as they have constantly supported their business by low rates, and now they simply cannot lower them again, which means the US is again in a better position. What is more, these are not all perspectives of growth for the US economy. Trump is planning to take part in the presidential elections again, and he can influence the course of the trade war between the US and China. Naturally, in this situation, he is likely to gradually stimulate the market by some positive agreements with China, which will make investors feel optimistic.
The business has already got accustomed to the influence of the fees. Any softening will do many companies only good, such companies mostly being the American ones as they are in a better position. The idea is proved by the recent quarterly reports by some of the biggest US companies.
Last week, Starbucks (NASDAQ: SBUX) published its financial results of the 3rd quarter. Its income turned out far higher than the forecasts. Its return on stock has grown from 0.62 to 0.70 USD, and its income — from 6.3 to 6.75 billion USD. The sales grew by 6% in the USA and 5% in China. Thanks to this, the company increased dividend payments from 0.36 to 0.41 USD per share.
The shares are currently trading on the 200-days MA, which acts as the support of the price.
Facebook (NASDAQ: FB) published its report about the 3rd quarter of 2019 on October 30th. Here, the income was also beyond expectations. The only year when Facebook failed to meet the expectations of analysts was 2018, the rest of the time the company has been increasing the profit actively. The return on stock, compared to the same period of the previous year, grew from 1.76 to 2.12 USD, the income rose from 13.73 to 17.65 billion USD. The number of daily and monthly users kept increasing, and the average return on user has grown to 7.26 USD, which is 19% higher than last year.
The stocks are trading in an uptrend, and rising to record maximums is not excluded.
The results of Apple (NASDAQ: AAPL) also pleased the investors. In the middle of the previous week, its stocks dropped from 250 to 240 USD but a good quarterly report helped them restore their positions and close the week with a plus. The return on stock grew from 2.91 to 3.03 USD, while the income increased from 62.9 to 64.04 billion USD. Thus, the company managed to demonstrate record profitability in terms of return per stock. Supporting its investors, the company spent 18 billion USD on buying back stocks and 3.5 billion USD on the dividends. In his interview for Reuters, Tim Cook expressed his hope for a smooth resolution of the trade conflict between the USA and China, which means there is potential for further growth of the company.
The record income allowed the stocks to demonstrate their historical maximums.
Even General Motors (NYSE: GM), after a 40-day strike that made some 30 plants of the company put work on a halt, managed to surprise the analysts by its results of the 3rd quarter of 2019. Its income amounted to 35.47 billion USD against the forecast 34.95 billion USD. The return on stock reached 1.72 USD, which is 19.8% than expected.
The company is still suffering from the conflict between the US and China. The sells in China dropped to 282 million USD, which is 42% less than the previous quarter. Thus, General Motors has huge potential here in case the relationship between the two countries warms up.
The stocks of the company are trading in a range, the fees on imported steel and aluminum deteriorated the results of the company significantly as they made the cars more expensive. Currently, the US market remains GM's main source of income, the profit the company loses, it compensates for by increasing the price. For GM, it is very important to restore its sales in China, for which they need to make their prices competitive.
The income of one of the world's largest pharmaceutical companies Pfizer (NYSE: PFE) also appeared higher than forecast. Unlike General Motors, it managed to increase sales in China. Generally, the income of Pfizer amounted to 12.68 billion USD, which is 0.41 billion USD higher than expected. The return on share reached 0.75 USD. The drugs that brought the company the largest part of its income were Ibrance, Inlyta, Xeljanz, and Vyndaqel. Their overall sales amounted to 1.491 billion USD.
The company's stocks are not at their best due to the decrease in the sales of Lyrica and the expired patent on Viagra, which the company started its robust development from in 1994. However, regardless of its difficulties, the company keeps surprising the investors by its quarterly reports.
Even in the current situation, US companies show record profit and go beyond the expectations of analysts. The cancelation of the fees and the removal of the barriers in the trade with China will increase their financial results even more, pushing the stocks of many companies to their historical maximums.
Well, everything looks good, the stocks are growing, so does the income, the investors make money, the stock indices renew their historical maximums. However, the situation should be evaluated soberly. As history shows, a crisis always comes unexpectedly. Even now, the S&P500 is trading at a strong resistance level, which it may bounce off and decline seriously to the area around 2500. This should not be disregarded.
All in all, today one should abstain from using leverage in trading. However, the New Year festive season is yet to come, profitable for the companies. The investors will be expecting good quarterly results, so this time the crisis is postponed until at least next year.