• Chris Simpson

Countdown to 2021!!! - Weekly Market Update July 31, 2020

“5 Months Till 2021”

2020 has certainly been a year for the history books so far. Between the coronavirus pandemic, the subsequent shutdown of the economy, school cancellations, month-long quarantines, no professional sports, and Black Lives Matter protests this year has been far from “precedented”.

The bright side is that we are one month closer to 2021. Hopefully, 2020 is just a rough beginning to what will be an exciting and fruitful decade.

Let’s take a look at some other updates from this past week.

“It’s A Kodak Moment”

Eastman Kodak stirred up some headlines this past week when they received a $765 million dollar loan from the United States government to start making...drugs?

First, two things:

1. Yes, Kodak (the camera company) still exists.

2. Not only that, but they’re also a publicly-traded company.

Kodak has had an interesting timeline as a company. After dominating the early 2000s with their iconic disposable cameras, they ultimately filed for bankruptcy in 2012 after iPhones took over. They attempted to pivot into cryptocurrency for a little and are now pivoting again into pharmaceuticals.

Instead of printing our photos from your family vacation, now Kodak is going to be churning out ingredients for medical supplies. This is all part of the U.S. government’s plan to reduce America’s reliance on foreign countries for vital medical supplies.

The result from the news of the loan? Kodak’s stock surged about 1,140% this week after being down 82% over the past 5 years. The 131-year-old company is now the most valuable it’s been since 2014.

The Obamas get into podcasting

Podcasts have been gaining steam and popularity for years and the industry may be reaching its peak right now.

➢ The Michelle Obama Podcast was released this week where she sat down with her husband (some guy named Barack?!) to discuss creating positive change.

➢ Earlier this year, Spotify also dropped a whopping $100 million deal with Joe Rogan for exclusive rights to his wildly popular The Joe Rogan Experience.

In addition to podcasts, the Obamas also have a multi-year deal with Netflix as well as quite a few book deals.

Big tech goes before congress

Amazon’s Jeff Bezos, Facebook’s Mark Zuckerberg, Apple’s Tim Cook, and Google’s Sundar Pichai all spent their Wednesday the same way...testifying before a House Judiciary Committee. The topic: Does these company’s market dominance violate antitrust laws?

First, a few facts:

➢ Amazon owns about 50% of the US eCommerce market which makes up 5% of all retail. This is bigger than their next 3 competitors combined.

➢ Facebook has about 2.6 billion users and also owns Instagram (1 billion users) and WhatsApp (2 billion users)

➢ Together, Facebook and Google are estimated to control 80% of the online advertising market.

For these stats and more, some lawmakers are calling for big tech to be broken up. The questions mainly circled around each of these companies stifling competition in their own ways. For example, Amazon has been accused of creating their own version of popular products and listing it first search results. Facebook has been accused of copying competitors’ most popular features (or just buying any competitors).

These hearings rarely lead to major change. Although, big tech is fairly unpopular in both governmental parties (for different reasons). This could be the beginning of a long process.

The U.S. GDP shrinks by 32.9%

This week, it was announced that the U.S. economy suffered it’s worst contraction since the second world war. On top of that, another 1.43 million people filed for unemployment, and COVID cases continue to rise. To give you a comparison of how bad a drop of 32.9% is, consider that the GDP only contracted by 8.4% during the worst month of the Financial Crisis in 2008.

Earnings reports are starting to come out and things aren’t looking good:

1. GM lost $800 million and burned through almost $8 billion in cash.

2. GE posted a loss of about $2 billion for Q2.

3. Wells Fargo lost about $2 billion Q2.

4. Boeing and American Airlines are also blowing through money.

Some companies have had the cash on hand to weather the storm and keep the lights on but numbers like these aren’t sustainable.

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.

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