Markets finished a strong week with some positive news on the trade front. Rumors circulated Friday afternoon suggesting the US and China have a framework to negotiate a new trade agreement. We’ve heard similar rumors before, but the fact they keep arising suggests to me both sides want to reach an agreement and end this unhelpful tariff talk we’ve been experiencing. For the week, the Dow gained 1.4% while the S&P 500 gained 0.6%.
In an interesting comment today, Trump mentioned he was asking to the SEC to evaluate whether companies should continue reporting financial results every quarter or whether we should move to a six-month reporting period. The idea apparently came out of a meeting Trump has with leading CEOs and was brought up by outgoing Pepsi CEO Indra Nooyi. The US has required quarterly financial reporting for 80+ years, but Europe only requires an annual report and a mid-year update. As with most things, there are pros and cons to each situation. Reporting every three months gives investors, specifically small investors, better transparency into the ongoing performance of a company. Most financial regulation in the last 20-30 years has been towards increased transparency for investors. Reversing that seems somewhat risky.
On the flip side, one of the downsides of such frequent financial reporting is it tends to put management focus on short-term objectives and planning. Running a successful business requires strategic, long-term thinking and planning. That long-term planning and implementation is often derailed by investors wanting to see immediate results. Personally, I’d like to see reporting go to twice a year. Earnings cause so much volatility in the market and the reporting periods are so small, relatively speaking. Most companies speak at investor conferences throughout the year, so investors would still get a steady flow of information in my mind. Management could then focus on running the business with a longer-term focus than they currently receive from investors. Read More
Oil declined this week, decreasing 2.8% to close at $65.87/barrel. The yield on the 10-yr Treasury moved lower, closing at 2.86% from 2.87% last week. The average rate on a 30-yr fixed rate mortgage moved lower to 4.53%, from 4.59% last week.
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