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Billionaire fund manager's message on trade deficit may shock you
Billionaire fund manager's message on trade deficit may shock you

Miami Herald

time26-05-2025

  • Business
  • Miami Herald

Billionaire fund manager's message on trade deficit may shock you

There's significant debate this year over tariffs. Proponents think tariffs will strongarm a return to US manufacturing while opponents believe tariffs are a consumer tax that could send the U.S. economy reeling. President Trump falls firmly into the tariffs-are-good camp. So far, he's slapped 25% tariffs on Canada, Mexico, and Autos. He also instituted a 10% baseline tariff on imports, and despite a recent rollback, still maintains a hefty 30% tariff on China, one of our largest trading partners. Related: Fed official sends strong message about interest-rate cuts Trump has even gone so far as to propose a whopper 50% tariff on the European Union, plus 25% tariffs on Apple iPhones and Samsung smartphones. All of these decisions are designed to reduce the U.S. trade deficit. The deficit for goods alone was a record $1.21 trillion last year, up from $1.18 trillion in 2022. The moves may encourage commitments to create new manufacturing plants in America, but not everyone is convinced that trade deficits justify tariffs, including Billionaire Ken Fisher, founder of Fisher Investments, which has nearly $300 billion in assets under management. Michael M. Santiago/Getty Images Trade deficits aren't necessarily a good thing, but they're not necessarily bad either. Increased imports from lower-cost countries can mean lost jobs, particularly in industries where labor costs are high, or gross margins are small. As a result, manufacturing jobs have been hit hardest by the trade deficit. Related: Billionaire fund manager has sharp one-word reaction to tariff's impact on manufacturing While job losses are concerning, trade deficits also mean that US consumers benefit from deflationary forces associated with importing goods from low-cost countries, like China. Clothing, electronics, car parts, and yes, iPhones, for instance, are much less expensive than they'd be if they were built in the United States. As a result, whether trade deficits are good or bad is likely influenced by your personal situation. Zoom out, however, and you realize that trade deficits aren't nearly as big of a problem for the US economy as other challenges, including inflation, which zaps economic activity, causing job losses, or mounting U.S. debt, which threatens higher interest rates on everything from credit cards to mortgages. In a recent post on "X," Fisher debunked the concept that trade deficits are bad, going as far as to label the idea as "ignorant." "Countries have run trade deficits, surpluses forever," said Fisher. "They've never been causal. People are afraid of the word deficit because it sounds bad... In reality, it's just an accounting model." Related: Jamie Dimon sends terse message on stocks, economy Fisher points out that this accounting simply measures the flow of money. Trade deficits or surpluses don't cause economic outcomes, they're a byproduct of them. As evidence, he points toward Germany and France, two very close trading partners similar to the U.S. and Mexico. Germany has long run a trade surplus and France a trade deficit with one another, yet each has seen their economy grow similarly. To further make his point, he says each of us "runs a trade deficit most of our life," because "you buy stuff," like groceries, exchanging our money for goods and services in a "one-way negative cash flow" relationship. "Is that deficit costing you?" Said Fisher. "No. You do something else outside somewhere that gets you what you need elsewhere." Fisher also points out that states have trade imbalances with other states, including some of the fastest growing states, like Tennessee or Georgia, that run negative trade balances. "America, land of the free home of the brave, has grown faster than most all of the countries that have trade surpluses against us," said Fisher. "We're doing other things that make use grow faster, as we grow faster, we become wealthier." Related: Veteran fund manager unveils eye-popping S&P 500 forecast The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.

German stocks near record highs — but will a Wall Street comeback spoil the party?
German stocks near record highs — but will a Wall Street comeback spoil the party?

CNBC

time18-05-2025

  • Business
  • CNBC

German stocks near record highs — but will a Wall Street comeback spoil the party?

The German DAX index continued its gains on Friday, with the index closing in on the all-time high it touched on just four days earlier. The DAX has risen by 19% since the beginning of the year, with European stocks frequently outperforming their U.S. counterparts as Wall Street grappled with selloffs. The upward trajectory came as investor optimism was boosted by Germany electing a new coalition government , a historic vote that paved the way for the country to ramp up defense spending. A so-called "sell America" sentiment that saw money flowing out of U.S. assets as U.S. President Donald Trump's trade policies spooked traders also played a role. But since the U.S. and China agreed to a 90-day pause on tit-for-tat tariffs on Monday, stocks on Wall Street have since reversed course and enjoyed a bumper rally . Lingering geopolitical uncertainty and the flow of money back into American equities is now clouding the outlook for German stocks and dividing strategists and analysts' opinions on how much further the Dax's good fortunes could have to run. Deutsche Bank 'the most bullish' on German stocks Taking a bullish view was Maximilian Uleer, research analyst at Deutsche Bank. While his team expects the S & P 500 's recent outperformance to persist in the short term as U.S. companies will be the bigger beneficiary of Washington and Beijing's bilateral tariff cuts, they do not believe the trend will continue. "We would [emphasize] the 'short-term'," he said, arguing that although tariffs were lower than feared for now, they would still be a bigger burden for U.S. companies than their European and German counterparts. "Political uncertainty is higher in the U.S. than in Germany," Uleer said. "Leaving out Autos, sequential earnings momentum is more favourable in Europe. Valuations are more favourable in Germany. The fiscal outlook is significantly more favourable in Germany. The rates environment is more favourable in Germany. A potential ceasefire between Ukraine and Russia would be more favourable for Germany." Deutsche Bank has a target price of 25,000 points for the DAX by the end of the year, a premium of over 5% on Friday's price. "Index forecasts for the DAX have been beaten significantly in the last 2 years and we expect the same to happen this year," Uleer noted. "We have been the most bullish and still are … The relative performance might stall short term, the directional upside remains." Marc Ostwald, chief economist and global strategist at London's ADM Investor Services, agreed that there was likely more upside ahead for the DAX. He said a broad improvement in risk appetite amid the U.S.-China tariff pause, on top of overall positive European earnings, was benefiting German stocks. However, Ostwald also noted there were caveats at play, including uncertainty around U.S.-EU trade relations and questions on whether the new German coalition "actually turns words into action to stimulate the economy." "The [DAX] upside may run into some headwinds short-term given next week's May equity options expiry, which will likely cap gains, but barring some adverse trade or geopolitical news, which continues to be an elevated risk, this rally has further to run," he said. Investor 'addiction to North America' could hurt upside Dan Coatsworth, investment analyst at AJ Bell, said Europe had been a "natural place to hunt" for cheap opportunities when a so-called "sell America" mentality gripped financial markets earlier this year. "Germany has stood out from the crowd because of its decision to ramp up spending on defence and infrastructure, creating a tailwind for various companies in the Dax index," he said – although he pointed out that Frankfurt's status as a cheap alternative to Wall Street was faltering. "The Dax is now trading at its most expensive level in four years at 14.8 times next 12 months' earnings. While that is still cheap relative to the US (the S & P 500 is on 20.4 times forward earnings), it's no longer the bargain that the German index used to be," he said. "The market has priced in so much good news which means you have to ask what else is needed to keep driving the index upwards." He argued that the S & P 500's recent rally may also have convinced investors that "all is not lost Stateside." "A lot of people … may not be able to fully give up their addiction to North America," he said. "There's a risk that profits are banked on German equities and proceeds reallocated to the US. [But] certain investors might want to hedge their bets and keep money invested in different parts of the world rather than going all-in on the US again." Also striking a more cautious tone was Carsten Brzeski, global head of macro at Dutch lender ING. "Looking ahead, I am not giving any estimates for the DAX but it is clear that if the US economy can defy a recession and the talks about de-dollarisation appear to have been premature, we could indeed see a reversal of some of the flows into European stock markets," he explained. "At the same time, given the high expectations that at least stock markets have for the German government and future growth, investors could get disappointed once they realise that it takes longer than hoped for any fiscal stimulus to reach the real economy." A trader watches his monitors on the trading floor of the Frankfurt Stock Exchange. Photo: Arne Dedert/dpa (Photo by Arne Dedert/picture alliance via Getty Images)

JPMorgan: Companies missing estimates are being penalized more than typical
JPMorgan: Companies missing estimates are being penalized more than typical

Yahoo

time16-05-2025

  • Business
  • Yahoo

JPMorgan: Companies missing estimates are being penalized more than typical

-- As the first-quarter earnings season nears completion, JPMorgan analysts say the market's reaction to earnings results has been notably skewed, with underperforming companies facing steeper-than-usual penalties. 'Companies missing estimates are being penalized by more than typical, while those beating estimates are being rewarded by less than average,' JPMorgan wrote in its final Q1 earnings tracker. They note that nearly 90% of companies in both the U.S. and Europe have reported results. Despite that muted stock reaction, earnings performance was solid. JPMorgan explained that in the U.S., earnings per share grew 12% year-over-year, with an 8% surprise factor relative to expectations. In addition, they stated that in Europe, EPS declined 2%, though that still marked a 4% surprise. Excluding the energy sector, which weighed heavily on both regions, U.S. EPS growth rose to 14%, and European growth turned positive at 2%. JPMorgan said that Communication Services, Healthcare, Discretionary, Tech, and Utilities led the U.S. earnings strength. In Europe, performance improved to 5% growth when both Energy and Autos were excluded. 'The spread between Mag-7 and S&P 500 ex-Mag-7 EPS growth has narrowed, [but] it is still robust, at +20% y/y,' the bank's analysts said, referencing the concentrated strength among a few large-cap U.S. tech stocks. Still, the outlook is said to remain cautious. 'Corporate guidance for 2025 profit outlook is relatively subdued, with the proportion of companies raising EPS guidance down again this quarter,' JPMorgan said. Related articles JPMorgan: Companies missing estimates are being penalized more than typical Cisco cut to Neutral at New Street Research as 'recovery played out' Berkshire Hathaway more than doubles Constellation Brands stake Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data

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