FOMO could bring more stock records in 2020
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If Wall Street’s predictions are to be believed, stocks should kick off 2020 with a bang.
Bank of America analysts said in a recent note that markets are primed for a “risk asset melt-up” in the first three months of the year. That’s when investors pile into stocks and other risky bets simply because they’re scared to miss out. Call it market FOMO.
“We expect returns to be front-loaded in 2020,” Michael Hartnett, Bank of America’s chief investment strategist, told clients.
Remember: A weight has lifted for investors in recent days following a “phase one” US-China trade deal and greater clarity on Brexit after the UK election. US and European stocks hit record highs again on Monday.
Notably, the MSCI All-World Index, which tracks stocks around the globe, also notched a record Monday. In recent days, the index has reached new highs for the first time since January 2018.
Stocks outside the United States are key to predictions from banks such as JPMorgan in 2020. Its strategists think shares in emerging markets and Europe can trump the S&P 500 next year after lagging behind in 2019.
While assets in Asia continued their ascent on Tuesday, Europe may be losing some steam.
Stumbling block: The pound is down 1%, back near $1.32, on concerns that UK Prime Minister Boris Johnson will only give himself to the end of next year to strike a new trade agreement with the European Union. The self-imposed deadline puts a cliff-edge Brexit back in play.
Boeing crisis deepens as it halts 737 Max production
Boeing shares are nearing their lowest point of the year after the company said it plans to suspend production of the 737 Max jet starting in January.
The embattled planemaker is still waiting for the US Federal Aviation Administration to certify the jet so it can be returned to service. In the meantime, new orders for the 737 Max have dried up.
Boeing has kept making about 42 of the planes per month. But it’s now sitting on an inventory of about 400 that it can’t afford to keep growing.
“We believe this decision is least disruptive to maintaining long-term production system and supply chain health,” the company said in a press release. Boeing’s stock fell more than 4% Monday and is down another 1.8% in premarket trading.
Remember: The 737 Max was grounded worldwide in March after two fatal crashes involving a Lion Air jet and an Ethiopian Airlines plane killed 346 people. The FAA has declined to provide a time frame for when it will let the plane return to the skies.
Bank of America analyst Ronald Epstein told clients Monday that a pause in production “could be the most prudent course of action in order to minimize the free cash burn.” But he noted that it would disrupt the airline industry’s broader supply chain, and could make it harder to get production back on track down the line.
Netflix looks overseas as US competition heats up
The recent launches of Disney+ and Apple TV+ in the United States send a clear message to Netflix and its investors: the streaming platform faces serious competition.
So Netflix is looking abroad — and it wants its investors to follow suit. The company on Monday released subscriber and financial data by region, showing that it had nearly doubled its subscriber count in the Europe, Middle East and Africa region since 2017. That’s a good sign for those who remember that Netflix lost US subscribers in the second quarter.
But it’s good to remember that Netflix makes less revenue per membership outside of the United States and Canada. There, Netflix brings in an average $12.36 per membership. In the Europe, Middle East and Africa region, revenue per membership falls to $10.26. In Latin America, it drops to $8.21.
Shares are flat in premarket trading, and are down about 17% since the beginning of July.
Up next
US housing starts and building permits for November post at 8:30 a.m. ET. FedEx reports results after US markets close.
Coming tomorrow: A mix of German economic data and UK inflation numbers will allow investors to keep tabs on Europe’s resilience.
