1. Shutdown Creates IPO Purgatory
As the shutdown ticks on into its 34th day, a severe backlog of companies wanting to go public is starting to build up, creating a proverbial purgatory. Spooky right? Well, if left unchecked the consequences for both the companies in limbo and the economy will turn from an inconvenience into a full-blown problem.
The IPO market is an essential part of Wall Street’s performance and a prolonged closure of the Securities Exchange Commission could push the IPO market as far back as March-April. A few important tech unicorns, such as Uber, Lyft and Pinterest are chomping at the bit to get into public markets and the shutdown has stopped them dead in their tracks.
Big name investment banks, such as Morgan Stanley & Goldman Sachs have come out saying that the shutdown not only impacts the companies chances of a successful IPO, but also damages market sentiment and momentum.
2018’s IPO landscape was a fairly barren place with most companies remaining below their initial offering price. The longer the crisis persists, the more nervy companies and investors will get. Let’s hope the IPO backlog in purgatory doesn’t overflow into the land of the living or 2019 may become a real IPO graveyard.
2. World On A Knife Edge
If there’s one thing that we’ve learned from Davos this week it’s that the world is in a synchronised global slowdown. But seriously guys, tell us something we don’t already know!
The problem here is that everyone has known for some time that global growth will be a concern in 2019, but hearing it reiterated over and over again has really sent the message home this week, thoroughly spooking investors.
The S&P 500 is currently teetering on an incredibly important technical level, known as the 50% Fibonacci level, which dictates whether the latest bull run has merely been a short-term pullback in the downtrend (dead cat bounce) or a fully-fledged reversal.
Elites in Davos constantly mentioned the fragile powder keg that is the current global economy and that even the slightest spark could set it off. The US-China trade war negotiations have been identified as a key contributor to elevated global risk levels and the most likely source of such a spark.
Negative developments could trigger an even sharper downturn, should proceedings sour between the two heavyweights. Even though both parties have agreed to a ceasefire, the prospect of $200bn in tariffs on Chinese goods to be enacted by the 1st of March is starting to return to investors minds. Tick-tock.
Today we are watching…
1. Abbvie (#abbv)
Despite being a little unloved of late, Abbvie, is displaying a few positive signs head of its earnings report today. The stock may be down 16.94% over the last 52 week period, but analysts have upgraded their estimates multiple times ahead of today which is often construed as a good omen. The consensus earnings per share estimate is $1.93 (+30.41%) on revenue of $8.37bn (+8.15%).
2. Colgate-Palmolive (#colgate)
Colgate-Palmolive is next on the earnings chopping block this week and analysts are skeptical about the company’s chances of beating estimates. Shares have declined 19.42% in the last 52 week period and analysts have revised estimates downwards ahead of today. The consensus EPS estimate is $0.73 (-2.7%) on revenue of $3.78bn (-2.8%).