“Tech Gains Lead The Way For Markets”- Weekly Market Update July 11, 2020
Aside from the NASDAQ, which jumped forward on tech-fueled gains, financial markets moved sideways this week. The Dow Jones and S&P 500 showed only mild losses, despite a record number of coronavirus cases being reported this week.
Additionally, Brooks Brothers joined the ranks of the fallen (Neiman Marcus, JC Penney, and J Crew, and others) in filing for bankruptcy this week. This is just the latest retail brand that has declared bankruptcy in a long list. The main reason cited was a long time trend towards more casual attire in work offices but the nail in the coffin was the coronavirus.
Let’s take a look at some of the biggest business updates from the past week.
Buffett’s Big Purchase
A couple of weeks ago we wrote that the investing world was awaiting a big move from legendary investor Warren Buffett. During times of financial turbulence, investors like to look toward certain people for leadership. This week we got that big move.
● Berkshire Hathaway announced last Sunday that they are spending about $10 billion to acquire natural gas assets from Dominion Energy.
● Although $10 billion sounds impressive, it’s actually relatively small considering the fact that Berkshire Hathaway has about $137 billion in cash.
● This purchase is somewhat interesting when you consider the broader industry trend towards more renewable energy forms (investors just made Tesla the world’s most valuable car manufacturer).
Although Buffett hasn’t made any other significantly large purchases, that doesn’t mean he hasn’t been active. He has been negotiating other deals that haven’t materialized. We will keep you posted on his next big deal.
The U.S. Is “Looking At” Banning TikTok
Yes, that’s the United States government thinking about banning a social media app. Let’s get some background:
● TikTok is one of the fastest-growing social media apps ever with over 175 million downloads in the U.S. alone (the U.S. population is about 330 million).
● TikTok is owned by a parent company called Bytedance (a Chinese company).
● Now, the U.S. government is concerned that the Chinese government is using the app to spy on U.S. citizens or will ask the company to supply data on their users.
TikTok has claimed repeatedly that they operate independently of Bytedance and that their data centers aren’t even located in China. However, Secretary of State Mike Pompeo has said that they are still going to take a “close look” at the company.
Although it’s for a different reason, this continues the Trump Administration’s trend of attacking social media companies. Trump has not been quiet about his disproval towards Twitter (and sometimes Facebook) and now they’re coming after TikTok as well.
Prime Vs. Walmart+
Walmart is on a quest to take on Amazon as American consumers go-to spot for shopping. Walmart has been the #1 grocer in the United States for quite some time and is one of the nation’s favorite stores for everything from A to Z. Amazon, however, is the world’s largest eCommerce brand and has been taking advantage of consumer trends to monopolize online shopping.
To fight back, Walmart has been revamping their own online store as well as offering services like 2-day delivery. Now, they’re launching their own subscription service to rival Amazon Prime.
Walmart+ (original name) will cost $98 a year and include same-day delivery of groceries, fuel discounts, and other perks. Companies love subscription services because they’re very “sticky”. If you (as a consumer) know that you’ll get rewarded for shopping at a certain brand, you’re more likely to do all of your shopping there. Walmat hopes to win market share away from Amazon by potentially swaying Amazon Prime members over to their own subscription (because people probably won’t pay for both).
Amazon is currently valued at $1.5 trillion compared to Walmart at $337 billion and Amazon Prime is a big reason why.
That’s it for this week -- Join us next week for another market update.
Securities and investment advisory services offered through NEXT Financial Group Inc. Member FINRA/SIPC. Sierra Ridge Wealth Management is not an affiliate of NEXT Financial Group Inc.
This material is not intended as an offer or solicitation for the purchase or sale of a security or an other financial instrument. Past performance does not guarantee future performance.
All the views expressed are those of Chris Simpson and not those of Sierra Ridge Wealth Management or NEXT Financial Group Inc. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks.