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Economics

Emerging Economies Must Prepare for Fed Policy Tightening

Policymakers may need to react by pulling multiple policy levers, depending on Fed actions and their own challenges at home.

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By Stephan Danninger, Kenneth Kang and Hélène Poirson

Policymakers may need to react by pulling multiple policy levers, depending on Fed actions and their own challenges at home.

For most of last year, investors priced in a temporary rise in inflation in the United States given the unsteady economic recovery and a slow unravelling of supply bottlenecks.

Now sentiment has shifted. Prices are rising at the fastest pace in almost four decades and the tight labor market has started to feed into wage increases. The new Omicron variant has raised additional concerns of supply-side pressures on inflation. The Federal Reserve referred to inflation developments as a key factor in its decision last month to accelerate the tapering of asset purchases.

These changes have made the outlook for emerging markets more uncertain. These countries also are confronting elevated inflation and substantially higher public debt. Average gross government debt in emerging markets is up by almost 10 percentage points since 2019 reaching an estimated 64 percent of GDP by end 2021, with large variations across countries. But, in contrast to the United States, their economic recovery and labor markets are less robust. While dollar borrowing costs remain low for many, concerns about domestic inflation and stable foreign funding led several emerging markets last year, including Brazil, Russia, and South Africa, to start raising interest rates.

New risks to recovery

We continue to expect robust US growth. Inflation will likely moderate later this year as supply disruptions ease and fiscal contraction weighs on demand. The Fed’s policy guidance that it would raise borrowing costs more quickly did not cause a substantial market reassessment of the economic outlook. Should policy rates rise and inflation moderate as expected, history shows that the effects for emerging markets are likely benign if tightening is gradual, well telegraphed, and in response to a strengthening recovery. Emerging-market currencies may still depreciate, but foreign demand would offset the impact from rising financing costs.

Even so, spillovers to emerging markets could also be less benign. Broad-based US wage inflation or sustained supply bottlenecks could boost prices more than anticipated and fuel expectations for more rapid inflation. Faster Fed rate increases in response could rattle financial markets and tighten financial conditions globally. These developments could come with a slowing of US demand and trade and may lead to capital outflows and currency depreciation in emerging markets.

The impact of Fed tightening in a scenario like that could be more severe for vulnerable countries. In recent months, emerging markets with high public and private debt, foreign exchange exposures, and lower current-account balances saw already larger movements of their currencies relative to the US dollar. The combination of slower growth and elevated vulnerabilities could create adverse feedback loops for such economies, as the IMF highlighted in its October releases of the World Economic Outlook and Global Financial Stability Report.

Difficult tradeoffs

Some emerging markets have already started to adjust monetary policy and are preparing to scale back fiscal support to address rising debt and inflation. In response to tighter funding conditions, emerging markets should tailor their response based on their circumstances and vulnerabilities. Those with policy credibility on containing inflation can tighten monetary policy more gradually, while others with stronger inflation pressures or weaker institutions must act swiftly and comprehensively. In either case, responses should include letting currencies depreciate and raising benchmark interest rates. If faced with disorderly conditions in foreign exchange markets, central banks with sufficient reserves can intervene provided this intervention does not substitute for warranted macroeconomic adjustment.

Nevertheless, such actions can pose difficult choices for emerging markets as they trade off supporting a weak domestic economy with safeguarding price and external stability. Similarly, extending support to businesses beyond existing measures may increase credit risks and weaken the longer-term health of financial institutions by delaying the recognition of losses. And rolling back those measures could further tighten financial conditions, weakening the recovery.

To manage these tradeoffs, emerging markets can take steps now to strengthen policy frameworks and reduce vulnerabilities. For central banks tightening to contain inflation pressures, clear and consistent communication of policy plans can enhance the public’s understanding of the need to pursue price stability. Countries with high levels of debt denominated in foreign currencies should look to reduce those mismatches and hedge their exposures where feasible. And to reduce rollover risks, the maturity of obligations should be extended even if it increases costs. Heavily indebted countries may also need to start fiscal adjustment sooner and faster.

Continued financial policy support for businesses should be reviewed, and plans to normalize such support should be calibrated carefully to the outlook and to preserve financial stability. For countries where corporate debt and bad loans were high even before the pandemic, some weaker banks and nonbank lenders may face solvency concerns if financing becomes difficult. Resolution regimes should be readied.

Commitments and confidence

Beyond these immediate measures, fiscal policy can help build resilience to shocks. Setting a credible commitment to a medium-term fiscal strategy would help boost investor confidence and regain room for fiscal support in a downturn. Such a strategy could include announcing a comprehensive plan to gradually increase tax revenues, improve spending efficiency, or implement structural fiscal reforms such as pension and subsidy overhauls (as described in the IMF’s October Fiscal Monitor).

Finally, despite the expected economic recovery, some countries may need to rely on the global financial safety net. That may include using swap lines, regional financing arrangements, and multilateral resources. The IMF has contributed with last year’s $650 billion allocation of Special Drawing Rights, the most ever.

While such resources boost buffers against potential economic downturns, past episodes have shown that some countries may need additional financial breathing room. That’s why the IMF has adapted its financial lending toolkit for member nations. Countries with strong policies can tap precautionary credit lines to help prevent crises. Others can access lending tailored to their income level, though programs must be anchored by sustainable policies that restore economic stability and foster sustainable growth.

While the global recovery is projected to continue this year and next, risks to growth remain elevated by the stubbornly resurgent pandemic. Given the risk that this could coincide with faster Fed tightening, emerging economies should prepare for potential bouts of economic turbulence.

 

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Economics

Top Trending Stocks to Buy Today

A few companies have started the season off strong. Let’s examine the top trending stocks investors are excited about.
The post Top Trending Stocks to Buy Today appeared first on Investment U.

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There is a ton of uncertainty in the investing world right now. First, new COVID-19 strains have turned into an ever-present threat to the entire economy. Second, many companies are still struggling with supply chain issues. Finally, analysts expect interest rates to rise at any minute. However, despite all of this turmoil, a few companies have started the season off strong. This is much-needed good news for investors. Let’s examine a few of these top trending stocks and see why investors are excited about them.

NOTE: I’m not a financial advisor and am just offering my own research and commentary. Please do your own due diligence before making any investment decisions.

What Creates Top Trending Stocks?

When you hear the word “trending”, most people think of a viral social media post. These are posts that everyone is talking about and sharing with each other. Honestly, trending stocks are not that different.

There are tons of factors that could lead to a stock starting to trend. Stocks can also trend for both good and bad reasons. For example, a stock might start trending in a good way because it announced a brand new service (Walt Disney Company and Disney Plus). A stock could also start trending in a bad way because of a CEO scandal (Activision and Bobby Kotick). A stock could even start trending for reasons that have nothing to do with the company (i.e. The GameStop Short Squeeze).

The most important thing is to figure out why a stock is trending, whether the news is good or bad, and how to react to it.

For this article, I’ve focused on stocks that recently crushed their Q4 2021 earnings reports. These stocks are all trending because they are performing better than investors expected them to. Let’s take a look.

No. 4 Levi Strauss & Co. (NYSE: LEVI)

Levi’s was founded in 1853. When things are looking bleak, it’s a good idea to invest in companies that have been around since 1853. They have a very proven ability to overcome tough times.

Apparently, even after 169 years, Levi’s are still in. In Q4 2021, Levi’s posted multi-decade records for revenue and profitability. Chip Bergh, President & CEO, attributed this success to a few factors. First, he praised Levi’s strong brand equity. This allows it to maintain pricing control and refrain from discounting too heavily. He also mentioned that Levi’s is expanding its direct-to-consumer business. This DTC division has much higher margins than Levi’s traditional business. It has helped to increase Levi’s profitability.

For Q4 2021, Levi’s reported revenue of $1.7 billion. This was up 22% from 2020 and 7% from 2019. Levi’s also beat both its earnings per share (EPS) expectations (2.43%) and revenue expectations (0.32%).

In more good news, Levi’s set super high growth expectations for 2022. It forecasted growth of 11-13% for next year. Chip even went so far as to say, “As good as this past year has been, I’m confident the future will be even better.”

In even more good news, Levi’s increased its dividend. This is usually the ultimate sign of security for investors. It shows that the business has so much money that it can afford to pay some back to investors. In total, Levi’s paid out $104.4 million in dividends during 2021.

No. 3 Tesla (Nasdaq: TSLA)

Tesla is rarely not one of the top trending stocks. Usually, Tesla only trends because of Elon Musk and his antics. This time around, however, Tesla is trending because of very substantial news. Namely, it crushed its earnings report.

Of all industries, electric vehicles were one of the hardest hit by supply chain issues. There are so many pieces (literally) that go into building a car. These pieces are sourced from all over the globe. This leads to a massive supply chain. Additionally, the average EV uses 2,000 processing chips. This means that the EV industry also had to battle the ongoing global chip shortage. A little surprisingly, Tesla was able to navigate these issues with no problem.

In Q4 2021, Tesla produced 305,000 vehicles. It also delivered 308,000 vehicles in Q4 and 936,000 for the year. This resulted in $17.72 billion in Q4 revenue. This was enough to beat both its revenue expectations (6.49%) and EPS expectations (6.88%). In total, Tesla reported a yearly gross profit of $4.8 billion. This was a 135% year-over-year (YOY) increase.

Interestingly, Elon Musk spent a good portion of the earnings call not discussing electric cars. Instead, his focus on was a new humanoid robot called Tesla Bot. Musk described Tesla Bot as, “the most important product that Tesla is developing this year.” He sees it as a potential answer to the current labor shortage.

No. 2 ServiceNow (NYSE: NOW)

ServiceNow is a cloud computing company. It focuses on managing workflows for IT, employees, creators, and customers. Essentially, ServiceNow creates digital experiences to make life easier for your company. Out of all of the top trending stocks, ServiceNow is the most relieving. Let me explain…

In recent months, the technology sector has been beaten down. Badly. It’s been the toughest stretch for tech stocks since the 2008 Financial  Crisis. Many once-popular names like Peloton, Roku, and Fiverr are down 70% or more from their all-time high. This is the case for most Nasdaq. This is why ServiceNow’s earnings report was so critical. ServiceNow sells critical software for businesses. It also works with 80% of the companies in the Fortune 500. If ServiceNow’s business was slowing down, it could be a very bad sign for the economy overall. Luckily, that wasn’t the case.

In Q4 2021, ServiceNow reported revenue of $1.5 billion. This was a 29% increase from 2020. It was also enough to beat both its revenue expectations (2.1%) and EPS expectations (0.59%). The management team at ServiceNow also expects this growth to continue into 2022. They’ve forecasted revenue growth of 26% for 2022.

This earnings beat came at the perfect time. ServiceNow is one of just a few tech stocks that has notched any green days at all lately.

Top Trending Stocks No. 1 Intel (Nasdaq: INTC)

Intel falls into a very similar category as ServiceNow. It is one of the world’s largest companies and sells a wide variety of different business solutions. Due to this, a slowdown in Intel’s business can be viewed as a bad sign for the overall economy. Luckily, Intel also just recently beat earnings. It also helps us round out this list of top trending stocks.

Intel reported Q4 revenue of $19.45 billion. This was enough to beat both revenue expectations (6.4%) and EPS expectations (19.75%). Notably, Intel trades at a price-to-earnings ratio of under 10 right now. This means that it is valued incredibly cheaply for the amount of money it makes. Most companies of Intel’s size trade at P/E ratios of closer to 20 or 30.

One reason why Intel is trading so cheaply might be due to investor uncertainty. Intel recently got a new CEO (Pat Gelsinger) in February 2021. He is currently investing heavily to help Intel increase its production capacity. The company plans to present more detailed plans on February 17, 2022. To read more on Intel, check out my Intel stock forecast.

I hope that you’ve found this article valuable in learning a few of the top trending stocks to buy. Please base all investment decisions on your own due diligence.

The post Top Trending Stocks to Buy Today appeared first on Investment U.

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Spread & Containment

Best Penny Stocks to Buy Next Month? Check These 3 Out

Can these penny stocks push up next month?
The post Best Penny Stocks to Buy Next Month? Check These 3 Out appeared first on Penny Stocks to Buy, Picks, News and Information | PennyStocks.com.

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3 Penny Stocks to Add to Your Watchlist in February 2022 

With February only a few days away, trading penny stocks remains extremely popular. Now, to make money with penny stocks in 2022, investors need to have a thorough understanding of what is going on in the stock market. Right now, the most pressing factors include Covid, inflation, the Fed monetary policy, and certain geopolitical tensions. And because penny stocks are so speculative, these factors all have a major and material effect on how they trade. 

[Read More] Why These 3 Penny Stocks Are Exploding Today

So, when you’re making a penny stocks trading strategy, having all of these in mind will help immensely. And, your strategy should also be able to adapt to the ever changing conditions of the stock market. As we all know, trading penny stocks in 2022 is not easy. And in the past week or so, the market has been in a major downtrend. But, with a lot to look forward to regarding the future, investors are excited about the next few months. With all of that in mind, let’s take a look at three penny stocks to add to your watchlist in February 2022. 

3 Penny Stocks to Watch in February 2022 

  1. Gingko Bioworks Holdings Inc. (NYSE: DNA
  2. Seanergy Maritime Holdings Corp. (NASDAQ: SHIP
  3. Root Inc. (NASDAQ: ROOT

Gingko Bioworks Holdings Inc. (NYSE: DNA) 

Today, shares of DNA stock managed to climb by almost 7% at midday. While many large gains like this occur without news, there are a few reasons why DNA stock is climbing right now. Today, Bank of America Securities announced coverage of Gingko Bioworks, initiating a Buy rating and an $8 price target.

While price targets are simply that, they are still crucial for investors to consider. This seems to be the main reason that DNA stock is climbing right now. However, the company did make an exciting announcement a week or so ago. On January 19th, Gingko announced the acquisition of Project Beacon Covid-19 LLC. This is a Boston-based social organization that is working on increasing the availability of Covid testing in Massachusetts. 

“As we embark on a new wave of the pandemic and grapple with the spread of the Omicron variant, large-scale testing will be critical to help keep kids in schools and mitigate the spread of COVID-19. ntegrating Project Beacon’s capabilities with our Concentric by Ginkgo offering will enable us to further empower communities in Massachusetts and beyond with the tools they need to make important public health decisions.”

The Chief Commercial Officer of Gingko, Matt McKnight,

This is very exciting news, and any company involved in treating, diagnosing, or curing Covid-19, has come into the public eye in the past few months. So, with that in mind, will DNA stock make your list of penny stocks to watch?

Seanergy Maritime Holdings Corp. (NASDAQ: SHIP) 

Today, shares of SHIP stock managed to climb by almost 12% at midday. It’s tough to say why SHIP stock is moving so heavily right now, but, it did make an exciting announcement on January 24th. On Monday, the company stated that it expects its Q4 TCE (time charter equivalent) to exceed $36,000 per ship per day. This is above the previous guidance of $35,200 per ship per day. 

“As a result of our pro-active hedging strategy in 2H21, we estimate that we will overperform the current spot market rate by approximately 50% in the first quarter. Moreover, our robust EBITDA generating capacity in multiple freight environments attests to our firm belief that our shares are currently significantly undervalued.” 

The CEO and Chairman of Seanergy, Stamatis Tsantanis

This is great news and could be the reason that SHIP stock is moving right now. In the past five days, shares have climbed by around 16%, which is no small feat. Considering all of this, will SHIP stock be on your penny stocks watchlist next month?

Penny_Stocks_to_Watch_Seanergy

Root Inc. (NASDAQ: ROOT) 

Another sizable gainer of the day is ROOT stock, which shot up by over 15%. Before we get into why, it’s important to understand what Root Inc. does. The company is a provider of insurance, revolutionizing the industry through data science and technology.

[Read More] 5 Top Penny Stocks To Buy Under $5 Right Now

It works to provide customers with a personalized and fair experience in modern insurance. The big news for the company came today when it announced a new term loan facility with BlackRock Financial Management Inc. The deal, with $300 million, will provide the company with ample credit to move forward with certain operations. 

“We are pleased with the successful execution of this new term facility. It accomplished several important objectives including extending our debt maturity and further enhancing our liquidity position with a partner focused on the long-term success of Root.

We are executing on a disciplined strategy to create enduring value through strong underwriting results, the development of our embedded product, and prudent capital management.”

The CEO and Co-Founder of Root, Alex Timm

Specifically, this deal with carry an interest rate of around 9% and includes an issuance of warrants from Root to Blackrock equal to 2% of issued and outstanding shares. This includes an exercise price of $9 per share. This is exciting news for the company and should help to stimulate growth for it in the short and long term. Considering that, will ROOT be on your buy list in February or not?

Penny_Stocks_to_Watch_Root

Which Penny Stocks Are You Watching Right Now?

If you’re looking for the best penny stocks to buy, there are hundreds to choose from. While it can be complicated given the sheer number of penny stocks out there, with research on hand, it is much easier than previously imagined. 

[Read More] Investing in Top Penny Stocks: Why, When, and How?

Now, to find the best penny stocks to buy, investors need to know exactly what is going on in the stock market and how to take advantage. This involves looking at the news, understanding how it may affect different industries and considering the future. With all of that in mind, which penny stocks are you watching right now?


If you enjoyed this article and you’re interested in learning how to trade so you can have the best chance to profit consistently then you need to checkout this YouTube channel. CLICK HERE RIGHT NOW!


The post Best Penny Stocks to Buy Next Month? Check These 3 Out appeared first on Penny Stocks to Buy, Picks, News and Information | PennyStocks.com.

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Economics

Is it too late to buy Visa after shares jumped 9.0% on record revenue?

Wedgewood Partners’ CIO says Visa Inc (NYSE: V) is a promising reopening stock a day after the financial services company reported record revenue for its fiscal first quarter. Rolfe’s bull case for Visa Inc Visa reported a 40% YoY increase in its…

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Wedgewood Partners’ CIO says Visa Inc (NYSE: V) is a promising reopening stock a day after the financial services company reported record revenue for its fiscal first quarter.

Rolfe’s bull case for Visa Inc

Visa reported a 40% YoY increase in its quarterly cross-border volume last night that David Rolfe sees as a positive catalyst for the stock. This afternoon on CNBC’s “TechCheck”, he said:

Now that the world is opening up post-COVID-19 pandemic, the all-important cross-border revenues are coming back. On top of it, it’s a stock that’s trading at 28 times this year’s earnings and about 24 times 2023. Probably one of the most dominant business models in the world.

His outlook is similar to Gradient Investments’ Jeremy Bryan, who also expects 2022 to be a great year for Visa. The stock jumped nearly 10% this morning and wiped its entire year-to-date loss. A double-digit single-day gain is fairly unusual for Visa; seen last in April 2020.

Fintech startups are not a threat for Visa

The chief investment officer does not see the rise of fintech solutions as a threat for Visa, which is now a sizable position for his investment management company. He added:

The narrative that Visa is going to lose market share versus some of these startup fintech companies just isn’t the case. These companies are partners; they ride on Visa’s rails. Square, PayPal, Coinbase, Strip; they are all partners.

Rolfe agreed the stock was a bit on the pricier side last year, but said it’s not anymore. “V” traded at a high of about $250 in July 2021 versus $222 at present. According to Rolfe, Wedgewood Partners has been loading up on “V” in recent weeks.

La notizia Is it too late to buy Visa after shares jumped 9.0% on record revenue? era stato segnalata su Invezz.

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