First Quarter in Review – Introduction
How time moves first. The first quarter of the year is now over and many things have happened. Some of these things could be an indicator of what comes next in the remainder of the year. In this article, I will review some of the things that have happened during the quarter and their implications.
On January 20th, Trump was sworn in as the 46th president of the United States. This brought in a new era for the United States and to a small extent, the globe. Trump is the first U.S. president without previous experience in government and military. He promises to deregulate the country and lower taxes. In the first quarter, his health bill failed to get enough votes. His plan to ban travel from several countries failed. Investors, who began the year on a high note are now a worried lot. They are not sure whether Trump’s plans will pass congress or not. As a result, the market has fallen from the all-time high it reached in the quarter.
Improving economic data
In the United States, the economic data released in the quarter has been good. The unemployment rate is currently at the lowest level in years. So far, more than 600,000 new jobs have been created. In addition, small business confidence is at the highest it has been in more than 17 years. Manufacturing is also improving. Retail which struggled in the past year is seeing an uptick also. Federal Reserve began increasing interest rates. Investors have priced in 3 more rate hikes in the remainder of the year.
This past quarter has been big on geopolitical tensions. First, there has been a lot of tensions between United States and Russia. Trump campaigned on the promise of improving relations with the country. He even said he was willing to meet with Putin before his inauguration. Three months in, he has not. America is carrying out investigations on possible links between his campaign and Russia. Second, Trump launched missile attacks in Syria, a country that is allied to Russia. Third, Trump campaigned on the promise of building a border wall and letting Mexico pay for it. He also promised to increase taxes on goods from Mexico. Still, nothing of the sort has happened. There are also tensions in the North Korea peninsula.
IPOs and M&A
In the first quarter, a few notable companies held their IPOs. The most notable one was the SnapChat IPO that helped propel the company to a $20 billion valuation. Other notable IPOs in the quarter were: MuleSoft which raised $220 million, Hamilton Lane which raised $190 million, and Alteryx which raised $126 million. In the M&A space, there was no notable mergers in the quarter. The Kraft Heinz bid to acquire Unilever for $143 billion was the most talked about IPOs.
The crude oil price has remained almost the same in the quarter with Brent having a high of $56 and a low of $45. The optimism that mired the crude oil world faded as concerns of oversupply and cheating by OPEC countries lingered. In the start of the year, there was optimism that the oversupply issues would be done away with after OPEC members agreed to limit production. This hope has faded as it has emerged that some countries have not cut the production.
In the remaining part of the year, these things are likely to continue. Investors should look at how geopolitical issues are handled. They should also look at how Trump addresses the key issues he raised during the campaign like deregulation and tax cuts. They should also look at corporate earnings and how they perform. Long term investors should take time to research companies that have been ignored by investors which might have made them underpriced.