Political Pause

Earnings season is winding down with only a handful of significant reports awaiting us this week. We will get an important look at the renewed bellwether Cisco Systems that is a major collaborator as a technology infrastructure play for enterprise software and security. It would be surprising if Cisco doesn’t report a solid quarter with a promising guide for the year ahead. Additionally, Waste Management, NVidia, and PepsiCo will also report. NVidia will be interesting for sure due to its recent decline in gaming and bitcoin related revenues. Investors will be looking for signs that the rough patch is coming to an end and brighter signals are ahead with indications of an improving demand ramp for the second half of the year. Finally, I would expect both Waste Management and PepsiCo to be solid with recent reports indicating both GARP (Growth at reasonable price) companies raising dividends and forging ahead with revenue growth above inflation trends.

Apart from earnings investors are forced to watch Washington fight over an unnecessary government shutdown and a clock ticking on the trade talks with China. Unfortunately, both of these events are now in the hands of politicians with chess pieces yet to be played. If you dare to be optimistic both of these deals could quickly come together with compromise on the wall dynamics and a worthwhile blueprint for further negotiations with China as economic conditions get worse with each passing month. Investors will definitely be looking over their shoulder for tweets and comments that could send stock prices down fairly easily after the nice gains in January. A good time for a political pause.

It would be a nice time to hear reports of new merger and acquisition activity but with the big bounce in January the pressure of weaker stock prices has been largely removed and any new deals will need to be strategic in nature and lean more toward last week’s merger of equal deal with SunTrust and BB&T regional banks. One big rumor that has been circulating since the problematic legal actions compromising Goldman Sachs with its Malaysian affair is that now would be a good and reasonable point for GS to combine with a large US regional bank like US Bancorp. I suppose that makes sense if you are a Goldman investor but I don’t know why US Bancorp would want to take on additional risk that comes with Goldman’s trading and investment banking operations. We will take a wait and see approach to this idea but I really don’t want US Bancorp to take on Goldman’s headaches and tarnishing its stellar record of prudent and profitable growth.

Happy Valentines to all,

Roger N. Steed

February 11, 2019

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