Cover story: Forty years after Congress passed the Revenue Act of 1978 and created the 401(k), 55 million people have plans totaling more than $5 trillion; The 401(k) rule “has hastened or improved retirement for a large segment of the population, namely people with full-time jobs and matching benefits, but it’s far from perfect,” and needs to be available to more people.
Features: 1) Cautious on KSS, TGT, TIF, HD, WMT, BBY, TJX: Retailers have managed to counter AMZN by ramping up their e-commerce fulfillment sides, improving supply chains, and taking other offensive steps, but even with a strong holiday outlook not all will ring up gains; 2) Oil’s descent during the past six weeks has shaken traders and sown doubt among investors, and the sector’s volatility could be a red flag for the rest of the economy; 3) Positive on BP, CVX, XOM, Royal Dutch Shell, EOG, COG, EQT: Energy companies have shown financial discipline by reining in capital spending and returning more cash to shareholders, and many shares look attractive despite a recent 15% retreat in the sector; 4) Just 13% of people working in corporate America have a defined-benefit pension plan—and few people work at one company long enough to get a pension that could support them in retirement.
Tech Trader: Cracks in AAPL’s narrative began to form after its recent earnings report, with some analysts saying its reduced transparency could be a sign iPhone sales have peaked, while two key suppliers singled out Apple for a shortfall in component orders.
Trader: The U.S. and China could reach a trade deal at the G20 and the Fed could pause on rate hikes, but even those actions might not be enough to fix the market; Positive on AMGN: Biotech generates more than $10B in free cash flow annually, is a good steward of its money, and has more cash than debt on its balance sheet; Positive on THS: Shares of the private-label food maker are down on negative headlines, but its strengths are obfuscated by restructuring-related charges and one-time items as it closes facilities and streamlines production.
Interview: David Pearl, co-founder of Epoch Investments, believes that looking at growing free cash flow is the way to pick stocks, and says “We are in one of the best economic periods since World War II” (picks: MS, CVS, HXL, AAPL).
Profile: David Sand and Andy Kaufman of Community Capital Management manage the Community Reinvestment Act Qualified Investment fund, which focuses on investments that are “sustainable, responsible, and impactful.”
Follow-Up: “The SEC must take the lead in proposing—if not compelling—cooperation and new approaches to improve the accuracy and reliability of the U.S.’s outdated and expensive proxy voting system.”
European Trader: Positive on British Land, Land Securities: The U.K.-based REITs have taken a hit over Brexit turmoil, but have reached price levels that merit consideration by income-oriented investors who think a Brexit deal will be reached by March 29.
Emerging Markets: A Chinese yuan weaker than seven to the dollar has acquired symbolic significance, and if it breaches seven, it’s hard to tell where the next line will be; Beijing watchers think a currency defense might be in the offing.
Commodities: Further natural gas price hikes may follow just as winter gets under way; prices will go up and down with the weather, with upside moves greater than downside moves.
Streetwise: Economic growth tends to be higher in emerging markets, attracting bankers but putting them in place that are “less well governed, more corrupt, and increasingly polluted,” according to Renaissance Capital.