Just How Much More will that CVS Run Cost in 2019?
To kick off the new year, over three dozen pharmaceutical companies raised their drug prices. The average price hike? 6.3%. As for some specific examples, AbbVie’s Humira will cost 6.2% more; Allergan will up prices by 9.5% on 27 of its products; and GlaxoSmithKline raised prices on 36 drugs, although all price increases were below 3%.
Bottom Line: Large pharmaceutical companies continue to ignore Washington’s call for lower drug prices. January rate hikes have become the norm.
Something to Rejoice About: 2018 Ended
2018 was the worst year for stocks since 2008. In 2018, the S&P 500 fell 6.24% while the Dow Jones fell 5.63%. 2018 was only the second year in the last decade where the Dow and S&P 500 finished in the red. As for tech, the Nasdaq finished the year down 3.88%.
Who is to blame for 2018? Tech stocks took a large fall as lofty valuations came under the microscope and sales growth prospects declined. Tech is not the only culprit though. The energy sector suffered amid falling oil prices, and trade-sensitive industries, like manufacturing, took a dive.
Tim Cook’s Message
Apple lowered its quarterly revenue forecast from $89 – $93 billion to $84 billion. Why did Apple CEO, Tim Cook, cut Apple’s Q1 revenue guidance?
Slowing iPhone, iPad, and iMac sales in Greater China
Rising tariffs and trade tensions worsened the economic conditions in China
Lower than expected iPhone revenue mainly in Greater China accounts for all of Apple’s shortfall of their revenue guidance
The Takeaway: The effects of the trade war are now starting to set in for U.S. companies. With investor jitters over slowing global economic growth running high, seeing Apple reduce its revenue forecast only raises investors’ anxiety.
The News Investors Needed
In a panel discussion, Powell said he will not raise interest rates if the economic conditions do not make sense to do so. Additionally, Powell commented that 2018 was a “good year for the United States economy” and that there is a lot of momentum heading into 2019. Backing Powell’s assertion, the nonfarm payroll increased by 312,000, smashing economists’ expectation of 182,000. However, since nonfarm payroll is a coincident indicator, not a leading indicator, it is possible for the economy to be on the brink of a recession despite a strong jobs report.
Bottom Line: The stock market does not directly follow the economy. While there has been no shortage of volatility in the stock market, the labor market remains robust.
How the Government Shutdown Impacts Main Street and Wall Street
Unable to reach an agreement on funding for a border wall, congress failed to reach a spending deal needed to keep the government fully functional.
On Wall Street: Since the SEC is closed due to the shutdown, no one can sign off new IPO registrations or provide feedback on confidential fillings. As a result, the host of early-2019 IPOs remain on hold.
On Main Street: Small business waiting for government loan approvals must now wait even longer. Additionally, 9 of 15 federal departments remain closed. Consequently, 380,000 workers are on unpaid leave while another 420,000 employees considered “essential” work without pay.
Looking Forward With Trump willing to prolong the shutdown for months or even years and the now Democrat controlled house unwilling to cave into Trump’s border wall demands, there is no apparent end in sight for the shutdown.
