Dilly dilly

MARKETS

  • Shutdown chronicles: We're now 24 days into the partial government shutdown, also the same amount of time it takes to walk from NYC to Denver, according to Google Maps. We'll see if the new week brings any progress.
  • U.S. economy: How's it doing, you ask? Hard to say. Key numbers on home construction and retail sales won't be released this week due to the shutdown.

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AUTO

Next Stop: Motor City

Picture
The North American International Auto Show in Detroit kicks off today, and, well...your town's upcoming 5K charity run is probably getting more press.

There aren't going to be too many flashy announcements, while brands including BMW, Audi, Ferrari, and Lamborghini couldn't be bothered to show up. Next year, organizers are moving the show to June in an attempt to boost its profile, so this will be the last Detroit auto show held in the depths of a Midwest winter.

Of course, there is plenty to talk about in the industry...

Starting with the collapse of sedans in the U.S.

The fall of the sedan has been remarkable, amounting to a "mass exodus out of classic family cars and into sport utility vehicles," writes Bloomberg.

So how bad is it?

  • Sedan models including the Honda Accord and Ford Fusion accounted for 30% of U.S. auto sales in 2018, a record low.
  • Sales of passenger cars will sink to 21.5% of the U.S. market by 2025, per LMC Automotive.
  • Look at this chart, paying close attention to the black line (cars) vs. red line (SUVs) going in opposite directions.

Picture
What this means for carmakers: They've got too many factories making the wrong product. Remember, GM said in November it would be idling five North American plants and cutting around 14,000 jobs.

So what's the future?

Electric and autonomous vehicles will eventually take center stage. The only problem? Some automakers are finding that developing these new technologies is too big a task to go it alone.

  • Ford and Volkswagen, for example, have been trying to build a "global automotive alliance" to keep costs down, and they're expected to reveal a deeper partnership this
  • Tesla's still the one with the target on its back, which is why GM is tapping its luxury Cadillac brand to lead its EV push.

+ For car enthusiasts: Here are some of the vehicles expected to make their debuts at the show.

WORKFORCE

Who’s Driving Participation in the Labor Market?

Millennial women (age 25 to 34) are getting jobs and looking for work at their highest levels in almost two decades, reports Bloomberg.

May we interest you in some data?

  • Young women have accounted for 86% of the growth in the workforce of women 25 to 54 since December 2015.
  • They also contributed 46% of the growth in the prime-age labor pool overall.

It's all the more striking because the same can't be said for young men, whose labor market participation rate hasn't yet eclipsed pre-recession levels (though it's still higher than females'). The current divide in participation levels between young men and women is now at its narrowest...ever.

So what's going on? Some of Bloomberg's hypotheses include...

  • Cultural trends: Younger women are delaying getting married and having kids, plus they're now more likely than young men to have a college degree.
  • Economic trends: The industries adding the most workers (e.g. health services) feature many women-dominated roles. And the recent bump in wages could be allowing working mothers to better afford childcare.

CALENDAR

The Week Ahead

We're wearing our lucky earnings season underwear. TMI?

Monday: Court hearing in the Theranos case; Earnings (Citigroup)

Tuesday: British lawmakers vote on PM Theresa May's Brexit deal; Earnings (Delta Air Lines, JPMorgan, United Airlines, UnitedHealth, Wells Fargo)

Wednesday: The Fed releases its Beige Book; Earnings (Bank of America, Goldman Sachs, BlackRock, PNC, Alcoa); Museum Selfie Day

Thursday: Jobless claims; Earnings (American Express, Netflix, Morgan Stanley)

Friday: Consumer sentiment; Earnings (Schlumberger)

EARNINGS

The Week Ahead, the Sequel

We're hoping this makes more money than the original.

If you've been reading the Brew, you know several bigtime companies (ever heard of Apple?) have slashed profit expectations heading into earnings season, which really gets going this week.

But that may not mean the sky is falling: Shares tend to perform better when profit expectations are low. And this is the most negative analysts have been heading into a reporting period in close to four years.

  • Analysts forecast 14.5% profit growth for S&P 500 companies in Q4, down dramatically from the 20.1% growth they forecast at the start of October.
  • The recent December sell-off lowered the bar for Q4 earnings reports, and, "Any companies that talk about 2019 being just as good as 2018 or even sequentially a lot better are going to constitute and upside surprise," Morgan Stanley's Lisa Shalett told Reuters.

Starting off with a bang bank. All the big banks opening their books this week should give us insight into the economy. After all, when businesses are hesitant to borrow, banks are typically the first to feel the pinch.

BEVERAGE

Bud Light Has a New Look

Starting next month, packages of Bud Light will have bigger nutrition labels showing calories, fat, carbs, protein, and ingredients. Which is bad news to those of you who've convinced yourself Bud Light is an integral component of a healthy Sunday breakfast.
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What's the play for Bud Light? Entice younger consumers who like to know what's in everything, including their light beer.

  • "They have grown up really in tune to ingredients," Bud Light's marketing VP told the AP.

FYI: AB InBev's Bud Light is far and away the bestselling beer in the U.S. with 15.4% of the market cornered in 2017. That year, it shipped 33.1 million barrels, nearly double its next-biggest competitor, Coors Light.

But will the new look work to Bud Light's advantage? Cornell University found that diners opted for lower-calorie apps and entrees if given nutrition info...but calorie count had little impact on ordering desserts or drinks. Suppose the heart wants what it wants.

WHAT ELSE IS BREWING

  • PG&E's CEO, Geisha Williams, is leaving the company. The California utility is facing billions in wildfire liabilities, and it may tell employees as soon as today that it’s readying to file for bankruptcy.
  • SpaceX will lay off 10% of its 6,000-person workforce to "become a leaner company."
  • Viacom, the owner of Paramount Pictures and MTV, is reportedly looking to sell a majority stake in some of its China businesses.
  • "Aquaman" hit the $1 billion mark in global ticket sales, becoming the third DC Comics adaptation to pass that threshold.
  • Megyn Kelly has officially split from NBC, $69 million in tow.

BREAKROOM

Auto Trivia
What was the bestselling vehicle model in the U.S. in 2018?

What about the U.K.? Norway? India? Japan?

(Answer located at bottom of newsletter)

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Breakroom Answers


Auto Trivia
U.S.—Ford F-Series, U.K.—Ford Fiesta, Norway—Nissan Leaf, India—Maruti DZire, Japan—Honda N-BOX
(Source)

 

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