Investors took an intermission.
The curtain appeared to close on the first act of 2019 last week – and what an impressive act it was. The Standard & Poor’s 500 Index delivered some dramatic returns and is less than 1 percent away from a new all-time high.
Despite relatively few shares changing hands, major U.S. indices eked out gains. Ben Levisohn of Barron’s explained:
“Trading volume was tepid at best. This past Monday, fewer shares changed hands than on any day since December 24 – when the market closed early for Christmas. Tuesday’s volume was lower than Monday’s, Wednesday’s was lower than Tuesday’s, and...well, you get the point. That was just another sign that no one wanted to place any big bets on the market this past week – in either direction.”
Investors were complacent even though news suggested trade talks with China were progressing well. They remained unruffled in the face of a Presidential tweet suggesting the United States will impose tariffs on Europe in retaliation for illegal subsidies to a European aerospace firm.
There was another interesting development in the United States last week. It was widely reported that a number of companies in retail and banking sectors increased entry-level hourly wages to levels well above the national minimum wage of $7.25 an hour. The companies are paying $13 to $20 an hour, according to Renae Merle of The Washington Post and a report from Reuters.
That is good news for workers, but not such good news for investors since higher wages could lead to lower corporate profits, reported Joe Wallace and Akane Otani of The Wall Street Journal.
Thought required. People make everyday decisions based on the information they possess at any given moment, explained The Economist. As understanding of an issue changes, so do the decisions people make.
For example, a lot of people dislike plastic grocery bags. Many shoppers choose to take cloth bags to the grocery store rather than use plastic bags provided by the store. In fact, some 240 cities and counties have laws that ban or tax plastic bags, according to Planet Money, and there is a national movement afoot to ban the bags.
However, the economics of plastic grocery bags is not as straightforward as many believe. Banning plastic bags appears to be an effective solution to a serious environmental issue. Unfortunately, it is not. An Australian economist studied the effects of plastic bag bans and discovered bans helped and hurt the environment:
In addition, paper bag use rose, creating 80 million pounds of paper trash annually. Paper is biodegradable and can be composted; however, producing paper bags requires water, fuel, and trees, so that should be considered as well, reported Stanford Magazine.
A separate study conducted by the Danish government found, “The most environment-friendly way to carry groceries is to use the same bag over and over again…the best reusable ones are made from polyester or plastics like polypropylene.”
Weekly Focus – Think About It
“The hardest thing to understand in the world is the income tax.”
Alert Einstein, Theoretical physicist
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https://www.barrons.com/articles/stocks-near-record-highs-as-investors-sit-tight-51555121334?mod=hp_DAY_3 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/04-15-19_Barrons-Stocks_Near_Record_Highs_as_Investors_Sit_Tight-Footnote_1.pdf)
https://www.wsj.com/articles/investors-brace-for-hit-to-profits-as-costs-rise-11554283800 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/04-15-19_WSJ-Investors_Brace_for_Hit_to_Profits_as_Costs_Rise-Footnote_5.pdf)
https://www.economist.com/finance-and-economics/2019/04/04/simple-interactions-can-have-unpredictable-consequences (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/04-15-19_TheEconomist-Simple_Interactions_Can_Have_Unpredictable_Consequences-Footnote_6.pdf)