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Morgan Stanley says investors are misreading the implications of a 'blue-wave' election outcome — and provides 2 recommendations for traders preparing for a Biden victory

Thu, 06/18/2020 - 1:31pm

  • Morgan Stanley's Michael Zezas said investors shouldn't get overconfident about the possibility of a divided federal government after the 2020 elections.
  • He said full sweeps by either party were more likely than most traders appreciate and that investors were misreading two key effects of a "blue wave" led by former Vice President Joe Biden.
  • He said they should recognize a Biden administration wouldn't be overly friendly to China and that Biden's infrastructure-spending plans made a fiscal contraction unlikely.
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There was a time, before probability forecasting and election needles, when people might have believed they understood how US elections were going to go.

Post-2016, that time seems long gone. Morgan Stanley said much of Wall Street was getting the 2020 election wrong as well — not in the big-picture sense of who wins and who loses, but in terms of some of the most important investing implications of the results.

Michael Zezas, Morgan Stanley's head of US public-policy research and municipal credit strategy, is warning them not to assume that a divided government — such as a Democratic-controlled House of Representative and a Republican-controlled Senate — is the most likely outcome.

Depending on who goes to the polls and how the presidential race ends, he said, both parties have a shot at unified government.

"These circumstances imply that divided government is not necessarily the favored result, and there is a more evenly distributed probability of election outcomes," Zezas wrote.

That means more possibilities to consider. And then there's the question of what the election might mean for stocks. After an initial position that anything other than a Trump win was bad news for stocks, Wall Street is adjusting to a more complex view.

According to Zezas, there are two basic ways they're misreading what would happen if former Vice President Joe Biden won the election in a "blue wave" and took office with a government fully controlled by Democrats.

(1) The belief: Tensions with China will fade

Investors spent much of 2018 and 2019 trying to figure out what was going to happen in the US-China trade war. Its course, and the market reactions to various news stories and tweets, were unpredictable.

While Biden's style would be very different from Trump's, Zezas said investors were wrong to assume he would be more accommodating to China than the president. The trade relationship has changed permanently, and even Democrats are less pro-China than they were years ago, Zezas said.

While China committed to buying more agricultural goods from the US as part of the "phase-one" trade deal, Zezas said those purchases may not happen if tensions increase again. That's especially bad news for agricultural-equipment makers like Deere, AGCO, and CNH Global.

"We see potential for rallies to be faded in consumer staples and machinery — sectors that would hypothetically benefit from reduced China tensions, but in reality would see fundamental pressure from the regulatory regime and higher statutory tax rates of a Democrat president," he said.

What to do: Underweight consumer staples, especially packaged-goods companies, and machinery.

(2) The belief: A Biden win means fiscal contraction

There's also an assumption that Trump's reelection would mean a more expansionary fiscal policy built around new tax cuts, more government spending, and bigger deficits. Meanwhile, Biden's higher-tax and more cautious spending approach could even be deflationary.

Zezas said that was wrong because the higher taxes Biden has proposed on some wealthy people and corporations wouldn't cancel out the big increase in spending Democrats are proposing. He added that infrastructure spending in particular could stimulate the economy.

"The net policy result of a Blue sweep in our view is a demand-side stimulus, which our economists argue could have a meaningful multiplier effect," he said. "Hence, the read in macro markets should, in our view, be toward higher rates and steeper inflation curves."

While Republicans and Democrats are proposing very different ideas, Zezas wrote that the economy would likely get stronger if either party won full control of the federal government. That means the details — more tax cuts versus more infrastructure spending — might not matter that much to the stock market.

What to do: "We think the best way to hedge for sweep scenarios is via long US 5s30s steepeners," he wrote, as he thinks the market is underestimating the possibility of inflation.

He added that Caterpillar, Deere, and United Rentals might benefit the most from a Democratic infrastructure-spending bill, while an increase in inflation would especially help the online brokers Charles Schwab and LPL Holdings.

Investors who want other methods to benefit from an increase in infrastructure spending could implement a strategy using exchange-traded funds like the Global X US Infrastructure Development ETF or iShares US Infrastructure ETF.

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We talked to 6 legal recruiters about the top hiring trends at major law firms if you're thinking of making a move in the middle of the recession

Thu, 06/18/2020 - 12:52pm

  • Senior lawyers' moves from one law firm to another, a common way for firms to improve their offering to clients, have dropped off sharply amid the pandemic's tumult.
  • Relatively junior attorneys have become even less mobile, with their number of lateral moves falling 59% from May 2019 to May 2020, according to Leopard Solutions.
  • However, there are some brights in legal hiring. 
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The number of lawyers moving from one law firm to another has fallen precipitously during the pandemic, with even experienced partners finding it harder to make a lateral move, according to new data shared with Business Insider.

While job losses in white-collar professions haven't been as bad as in hotels and restaurants, law firms have also been squeezed by the pandemic, cutting costs and delaying major projects. 

The economy's rapid turn into a recession and the sharp rise in unemployment have also had a major impact on lawyer mobility, according to data from Leopard Solutions, a widely used legal recruiting tool. The number of partner moves tracked in May at the top 200 firms in the US were 56% below the same month in 2019, and the April numbers were down 52% year-over-year.

Hiring lateral partners is a key method law firms use to expand their offering and meet potential new clients. Even during the last recession, such moves didn't slow down, even as hundreds of associates were laid off because of a lack in client demand. Slowdowns in both areas of hiring suggest firms reflect how uncertain times have become, attorneys and recruiters said.

Read more: No Yankees games, schmoozing, or steak dinners. Here's what summer associates at Big Law firms can expect this summer.

"The fact that hiring has slowed considerably shows that there is trepidation in the legal industry about what the future will hold and how much work they're going to be able to support," said Carolyn Aberman, a managing partner with the Lucas Group in Chicago.

Associate attorney moves were down 59% year-over-year last month, the data show, falling from 658 moves in May 2019 to 267 in May 2020. In April, associate move volumes were down 25%, but March was unusually busy, with the 692 moves recorded at the biggest firms, almost double the total from last March.

"Everybody was in growth mode, until suddenly, they weren't," said Laura Leopard, CEO of Leopard Solutions.

The data, gleaned from law firm websites, puts hard numbers behind a widely shared feeling that lateral movement has slowed down. While law firms are still willing to take meetings and onboard good candidates remotely, headhunters have said most firms are hesitant to bring on people they haven't met because of the extreme uncertainty caused by the coronavirus pandemic.

Recruiters have said that associates and partners in areas like bankruptcy, employment law and data privacy remain in demand among the law firms they work with because there is a pressing need for their skills. The firms that are best able to attract partners have elite practices and a broad, global client base, said Mark Jungers, of the firm Lippman Jungers Bala. 

"Right now, about a quarter of the firms we've talked to have said they pretty much stopped lateral hiring for the time being, with about three-quarters saying, 'no, we're still looking,'" said Steve Nelson, a recruiter at the McCormick Group.

Read more: Peloton rides, beer by mail, and bouncy castles: Here's how Big Law partners are getting and keeping clients during a pandemic

Recruiters are pursuing a mix of strategies and leads to match firms and lawyers. Phil Morimoto, the CEO of Boston-based recruiter ESA, said he has been focusing on the most elite firms, but said they want truly exceptional partner candidates. Headline-making hires that have unfolded recently include the move to Paul Weiss by litigation superstars Karen Dunn and Bill Isaacson and the move from Sidley Austin to Faegre Drinker by bankruptcy practice leaders James Conlan and Patrick Corr.

"You have to get somebody with a $10 million or $15 million practice to get a firm excited about the idea of moving at this point," Morimoto he said.

Wendy Schoen of Schoen Legal Search said she's had Big Law partners with smaller books of business contact her about the prospect of moving to a smaller firm because they are worried about being let go. After the last recession, she said, less-profitable practices were shown the door – as Debevoise & Plimpton did with its trust-and-estates team in 2013 – and she predicted the "carnage" could start later this summer.

Firms have been cutting pay and taking all sorts of steps to avoid layoffs in recent months, but Schoen said "stealth layoffs" – financially motivated cuts disguised as performance-related ones – have already begun, and income partners are vulnerable. "Each firm has their own line, but at some point, they're going to decide," she said

Some firms haven't changed course, however, reasoning that adding a partner should be based on a long-term plan rather than short-term conditions. Gloria Sandrino, a recruiter at Lateral Link, said in a Tuesday webinar that somewhere between a fifth and a quarter of firms are going forward with the recruitment plans they made before the pandemic struck the U.S.

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At Paul Hastings, which was ranked as the 24th-largest U.S. law firm by the American Lawyer, Ronan Sullivan, a managing partner, said his firm is focused on hiring in areas, including real estate finance and structured finance, where he said business has been growing in recent years.

"Our views on lateral partners, and our need and ambition to grow by attracting really talented partners and associates, hasn't changed," he said. "The areas in which we're looking are frankly the same areas we were looking six months ago, 12 months ago."

The slump in movements for Big Law associates comes amid a slowdown in several practice areas. In a recent survey from Major Lindsey & Africa, the industry's largest recruiting firm, 39% of associates said their workload had decreased since the start of the pandemic, compared to just 21% who said it had increased and others who said it hadn't changed.

The hardest-hit practice was real estate, where 58% of associates said their workload had fallen and just 9% reported that it had increased. Young lawyers in their firms' intellectual property and tax practices were also more likely than average to report a slowdown. By contrast, 53% of bankruptcy associates said their workload had increased, as did 44% of healthcare associates.

There are some hopeful signs, however. Leopard said job listings on her platform, largely for associates and law firm staff, are "inching back up" in some areas after having fallen by about half in recent months. The US Department of Labor also reported that the legal sector added about 3,200 jobs last month after having shed more than 60,000 jobs the month before.

"Even though this may be a longer problem worldwide, it also has a bit of a temporary feel to it," she said. "When we get a vaccine, everything will be fine again."

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BLOCKCHAIN IN BANKING: An inside look at four banks' early blockchain successes and failures

Thu, 06/18/2020 - 1:00am

Since its emergence at the start of the decade, blockchain has been heralded as one of the most transformative technologies for financial services. Blockchain hype has led financial institutions (FIs) to pour money into the space and into distributed ledger technology more broadly: about $1.7 billion annually as of 2018, per research from Greenwich Associates cited by Bloomberg.

Despite the hype, sentiment around the technology has grown increasingly skeptical as FIs struggle to realize the value of their investments. Incumbents have shuttered some early experiments, and FI execs are beginning to discuss blockchain's prospects in bearish terms.

Key difficulties include scaling the technology for commercial application, ongoing regulatory uncertainty, and the difficulty of bringing together competing participants.

Yet amid the noise, it's becoming more clear where exactly blockchain has value, and some players are beginning to make genuine inroads in their adoption and deployment of the technology. Those who are finding success are both pushing back against souring industry sentiment and setting themselves up as industry leaders.

In The Blockchain in Banking Report, Business Insider Intelligence explores early blockchain successes and failures at four major banks, identifies the lessons these early wins — and losses — have for the rest of the financial services industry, and outlines actionable steps that industry players can take to ensure the success of their own blockchain projects.

The companies mentioned in this report are: Australia and New Zealand Banking Group (ANZ), Bank of America (BofA), Citi Bank, CME Group, Fidelity Investments, HSBC, IBM, JPMorgan, Marco Polo, Mastercard, Nasdaq, PayPal, Ripple, Royal Bank of Canada (RBC), Santander, SWIFT, and Visa.

Here are some of the key takeaways from the report:

  • Blockchain has been one of the most hyped technologies within financial services, heralded for its potential to eliminate pain points across the industry. 
  • Despite this enthusiasm, questions have come up about the technology's efficacy as FIs struggle to actualize blockchain solutions. Among the key challenges holding back blockchain adoption are scalability and performance, trust, and regulatory uncertainty.
  • Yet, for all its difficulties, blockchain's promise to transform financial services processes has meant leading banks are attempting to figure out where the technology does and does not work firsthand, to varying degrees of success.
  • To implement an effective blockchain solution, decision-makers should first determine how much they're willing to commit to the technology and identify a genuine business problem that blockchain can resolve. Only then should they develop a strategy for delivering a blockchain project.

In full, the report:

  • Details the key roadblocks holding backing blockchain adoption within financial services.
  • Identifies the most promising use cases are which industry players are coalescing.
  • Explores four banks' early blockchain project successes — JPMorgan and HSBC — and failures — Citi Bank and BofA — and the lessons they provide.
  • Provides actionable recommendations on how banks can successfully pursue a blockchain project.

Interested in getting the full report? Here are two ways to access it:

  1. Purchase & download the full report from our research store.  >> Purchase & Download Now
  2. Subscribe to a Premium pass to Business Insider Intelligence and gain immediate access to this report and more than 250 other expertly researched reports. As an added bonus, you'll also gain access to all future reports and daily newsletters to ensure you stay ahead of the curve and benefit personally and professionally. >> Learn More Now

The choice is yours. But however you decide to acquire this report, you've given yourself a powerful advantage in your understanding of blockchain in banking.

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THE PAYMENTS FORECAST BOOK 2019: 22 forecasts of the global payments industry's most impactful trends — and what's driving them

Wed, 06/17/2020 - 10:00pm

As cash usage declines slowly worldwide, the digital payments ecosystem is swelling around the globe: Noncash transactions are poised to exceed 1 trillion for the first time in 2023, driven by increased card penetration, wider access to mobile phones, and more access to payments infrastructure.

In emerging markets, these changes will be driven by Asia, which remains at the helm of digital transformation in payments as customers in major markets like China, India, and Southeast Asia flock to wallets like Alipay and Paytm and super-apps like WeChat and Grab in lieu of cash and cards for their payments, both online and in-store.

Change looks different in mature markets like the US, where the overall expansion of the digital payments market will remain more tempered, but mobile's impact will surge as customers move from PCs to mobile and other emerging connected devices for their online shopping, and replace small-dollar cash P2P transactions with mobile apps like Venmo and Zelle. For providers looking to make inroads in the space, understanding the dynamics of these changes will be key to growth.

In the 2019 edition of the Payments Forecast Book, Business Insider Intelligence will forecast growth in the major sectors of the payments ecosystem worldwide, with a particular look at the US market.

The forecast book, presented as a slide deck, highlights change by region in areas like noncash transactions, e-commerce, card adoption, and terminal penetration, and examines key areas of change, including contactless transactions, fraud, and mobile payments. Within each category, it provides insight into what the market will look like in 2024 and identifies key factors that will accelerate and inhibit growth.

The companies mentioned in this report are: Affirm, Alibaba, Amazon, Clover, Discover, Google, Grab, iZettle, NACHA, Klarna, Mastercard, PayPal, Square, Starbucks, The Clearing House, Venmo, Visa, Verifone, Zelle,

Here are some key takeaways from the report:

  • Globally, noncash transactions will exceed 1 trillion in 2024, driven by growth in APAC, which will comprise 40% of transactions by 2024.
  • Card adoption will grow rapidly in markets like Latin America and the Middle East to 2024, but stagnate in sub-Saharan Africa, where customers largely transact through nonbank methods.
  • US retail spending will grow modestly, but e-commerce will nearly double its share of total retail sales by 2024 as customers do more everyday shopping online.
  • Card payments will tick up as US customers continue to abandon cash, but mobile will remain the brightest growth driver, coming to comprise 44% of the $1.9 trillion in e-commerce and 68% of the $760 billion in P2P payments in 2024.

In full, the report:

  • Identifies big-picture trends moving the needle in the payments ecosystem both globally and in the US.
  • Forecasts growth in key sectors, including noncash transactions, card and terminal penetration, fraud, e-commerce, and mobile payments, through 2024.
  • Discusses what the global payments market will look like in 2024, and how that differs from the present.
  • Highlights key growth engines and inhibitors that will drive change between now and 2024.

Interested in getting the full report? Here are two ways to access it:

  1. Purchase & download the full report from our research store. >>Purchase & Download Now
  2. Subscribe to a Premium pass to Business Insider Intelligence and gain immediate access to this report and more than 250 other expertly researched reports. As an added bonus, you'll also gain access to all future reports and daily newsletters to ensure you stay ahead of the curve and benefit personally and professionally. >> Learn More Now

The choice is yours. But however you decide to acquire this report, you've given yourself a powerful advantage in your understanding of the fast-moving world of digital payments.

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These are the winning strategies for AI in banking

Wed, 06/17/2020 - 6:05pm

Artificial intelligence (AI) applications are estimated to save banks $447 billion by 2023, and front- and middle-office AI improvements could represent more than 90% of these savings.

Leveraging AI tools like chatbots, voice assistants, and personalized insights can transform the customer experience by enabling frictionless, 24/7 interactions. Additionally, in middle-office banking, AI can be used to improve anti-money laundering efficiency and payments fraud prevention.

A recent OpenText survey found that 80% of banks are highly aware of the potential benefits presented by AI, but much fewer have taken the dive into implementation. When mindfully executed, AI can enable cost cuts, risk mitigation, and a better user experience, but what does winning execution look like?

In the Winning Strategies for AI in Banking report, Business Insider Intelligence looks at several effective strategies used to capture AI's potential in banking, and details how financial institutions like Citi and US Bank have successfully implemented some of these strategies.

This exclusive report can be yours for FREE today.

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Amazon could surge 90% to $5,000 in long-term bullish scenario, analyst says (AMZN)

Wed, 06/17/2020 - 4:24pm

  • Amazon could surge 90% to $5,000 in a long-term bullish scenario, driven by a "hidden value multiplier thesis," according to a note published by Needham on Tuesday.
  • The firm set a 12-month price target of $3,200, but thinks that target can swell in the long run due to Amazon's track record of total addressable market expanding decisions.
  • Needham said that those decisions have a tendency to "elongate its growth runway, drive higher profitability, and lower shareholder risk via revenue-stream diversification."
  • Needham assumes that the COVID-19 pandemic has accelerated consumer adoption of Amazon's products and services for the long term, which should result in strong free cash flow growth over the next three years.
  • Visit Business Insider's homepage for more stories.

Amazon could continue to trade at all-time highs for years to come and eventually hit $5,000 a share, representing 90% upside from current levels, if Needham's long-term bullish scenario play out.

In a note published on Tuesday, the firm said that Amazon has several "hidden value multipliers that suggest it is worth between $4,500 and $5,000 per share. Those four multipliers include:

1. Total addressable market expansion multiplier. Amazon has a history of continuing to expand its growth runway by adding adjacent market offerings with sizable total addressable markets "that weren't visible 3-5 years prior to the investments," Needham said. One product line highlighted is Amazon's Alexa devices. The firm said these market expansion decisions have a strong track record of driving higher profitability, elongating its growth runway, and lowering shareholder risk via revenue-stream diversification.

2. Services company (not product) multiplier. Amazon has transformed into a services company over the past decade, evidenced by the astronomical growth of Amazon Web Services, which represents 43% of the company's revenue, and has operating margins of 19%, according to Needham. The firm said it thinks that AWS is worth $560 billion as a standalone company.

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3. $500 billion of media asset value (largely hidden) multiplier. Needham thinks Amazon's addition of media assets like video, Twitch, and music to the Amazon Prime bundle "lowers churn, keeps users in the Amazon ecosystem for an extra 3 years, and increases the lifetime value by $3,437 per user." The firm said that Twitch is the most undervalued asset inside Amazon's business, because it "extends Amazon's reach into the next generation of purchasers."

4. Ecosystem value multiplier. Needham said Amazon's scale economics, data superiority, and brand franchises "generate additional revenue for any business owned by Amazon compared to what the business could generate as a stand-alone entity. Amazon's ecosystem essentially draws customers in and leads them to spending more money in other areas of the business."

Needham continued: "We estimate that any business appended to Amazon's core e-commerce business is worth 1.5x more than that company would be worth outside the Amazon umbrella. By implication, sum-of-the-parts calculations based on public company comps meaningfully understate Amazon's value."

Needham assumes that the COVID-19 pandemic has accelerated consumer adoption of Amazon's products and services for the long term, which should result in strong free-cash-flow growth over the next three years.

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Needham initiated Amazon with a buy rating and a 12-month price target of $3,200 per share, representing potential upside of 21% from current levels.

Amazon traded up as much as 1.5% to $2,655 in Wednesday trading, and is up more than 40% year-to-date.

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Hertz pauses plan to sell $500 million in potentially worthless stock after SEC weighs in

Wed, 06/17/2020 - 4:13pm

  • Hertz paused its plan to sell as much as $500 million in new, high-risk shares on Wednesday after the Securities and Exchange Commission raised concerns with the sale.
  • The offering was "promptly suspended" after discussions with SEC staff, and is "pending further understanding of the nature and timing of the Staff's review," Hertz said in a regulatory filing.
  • The newly bankrupt company's stock was briefly halted earlier Wednesday following news of the SEC's issues.
  • Watch Hertz trade live here

Hertz halted its plan to offer up to $500 million in new shares after the Securities and Exchange Commission raised issues with the sale.

In a regulatory filing published Wednesday afternoon, the bankrupt car-rental chain said its plans for the offering were "promptly suspended" after discussions with SEC staff. Any revival of the stock sale is "pending further understanding of the nature and timing of the Staff's review," the company added.

Hertz stock was paused late Wednesday morning after SEC Chairman Jay Clayton noted his concern with the planned offering.

"In this particular situation, we have let the company know that we have comments on their disclosure," Jay Clayton, chairman of the SEC, said on CNBC. "In most cases when you let a company know that the SEC has comments on their disclosure they do not go forward until those comments are resolved."

Read more: Schwab's global investing chief says the market's best-performing stocks are due for a surprising rotation for the first time in 12 years — and shares 3 ways to get ahead of the shift

The last-minute stock sale was meant to capitalize on Hertz stock's outsized volatility over recent weeks. Hordes of retail investors betting on an unlikely reemergence from bankruptcy piled into the firm, driving shares as high as $6 each from $0.80 just days before.

Even if the sale moved forward, the firm noted that major risks loomed over participating investors. Hertz cautioned on June 11 that "the common stock could ultimately be worthless" should bankruptcy proceedings continue, as creditors and bondholders are slated to receive funds before shareholders see any cash returned.

Hertz closed at $1.96 per share on Wednesday, up roughly 0.5% from Tuesday's close. 

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US stocks fall as investors weigh looming risks to economic reopening

Wed, 06/17/2020 - 4:12pm

  • US stocks slipped on Wednesday, ending a three-day S&P 500 winning streak.
  • All three major indexes fluctuated between gains and losses for most of the session as traders weighed new spikes in coronavirus cases.
  • Oil traded lower after big gains on Tuesday. West Texas Intermediate crude slid as much as 3.1%, to $37.21 per barrel.
  • Watch major indexes update live here.

US stocks slipped on Wednesday, ending a three-day S&P 500 winning streak. 

The decline comes amid spikes in confirmed COVID-19 cases in several areas in the US, stoking concerns over a potential second-wave shutdown.

But the news wasn't all negative. Data released on Wednesday morning showed that mortgage applications surged 4% last week and were up 21% from the year-ago period, indicating a strong bounce-back for the housing market and US consumers.

Here's where US indexes stood at the 4 p.m. ET market close on Wednesday:

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The two positive readings follow homebuilder sentiment was reported jumping in June at a record pace. New home sales and construction will likely increase in the coming months and solidify a remarkable bounce-back for the sector, Ian Shepherdson, chief economist at Pantheon Macroeconomics, said.

"In short, the housing market is on track for the fastest and most complete recovery of any sector in the economy," he said.

Federal Reserve Chair Jerome Powell spoke to House lawmakers Wednesday afternoon, revealing plans to slowly shift the central bank's corporate-credit purchases from exchange-traded funds to individual bonds. The targeted purchases are "a better tool for supporting liquidity and market functioning," Powell said.

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Soaring tech names led the Nasdaq composite to outperform its peers. Apple climbed to an intraday record after RBC Capital Markets upgraded its price target to imply an 11% gain over the next year. The firm's analyst praised the tech giant's share repurchase program, saying Apple "remains in a league of its own."

Oil traded slightly lower on Wednesday after tearing higher on Tuesday. West Texas Intermediate crude fell as much as 3.1%, to $37.21 per barrel, before paring some losses. Brent crude, the international benchmark, sank 2.3%, to $40.03 per barrel, at intraday lows.

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The mild gain followed a 527-point increase for the Dow on Tuesday, driven by the retail-sales beat and a Bloomberg report that said the White House was considering a $1 trillion infrastructure initiative. Popular so-called reopening stocks, including American Airlines, Carnival Cruises, and Gap, swung higher as investors maintained hopes that a full reopening would arrive soon.

Retail-sales data released Tuesday also propped up investor optimism. Spending leaped 17.7% in May, more than double economists' consensus estimate, serving as another sign of the V-shaped rebound that investors are seeking.

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The 2020 stock market looks just like 2009 — and the S&P 500 is set for a 14% gain if history repeats itself, an analyst says (SPY)

Wed, 06/17/2020 - 3:24pm

  • The S&P 500's recent rally from its March 23 low is closely tracking the bottom and subsequent rally that the index experienced in 2009 amid the financial crisis, an analysis by DataTrek found.
  • If the S&P 500 continues to closely track its 2009 movements, investors should expect it to cruise 14% from current levels to all-time highs by the end of the year, DataTrek said.
  • In 2009, the market saw a 17% rally from late July through the end of the year — and "if history repeats itself that would put the S&P at 3,588 on December 31," DataTrek said.
  • Visit Business Insider's homepage for more stories.

The S&P 500's trading activity since its March 23 low is closely tracking the index's price movements back in 2009 when it bottomed during the financial crisis, a note from DataTrek published on Monday said.

As of Monday — 58 days since the March 23 bottom — the S&P 500 was trading 37.1% higher. In 2009, 58 days after its March low, the index was trading 39.4% higher.

As the S&P 500 has traded higher, its attempts to get ahead of the 2009 rally have failed. On April 14, "the 2020 rally got ahead of 2009 by 11 full points (+27.2% from the lows vs +16.4% in 2009)," DataTrek said, but "then gave up all those gains in the next 5 days."

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Additionally, the S&P 500 started last week 13 points ahead of the 2009 rally, but a 6% sell-off last Thursday again helped close that gap between the 2020 and 2009 rallies.

The takeaway from DataTrek is this: "The 2020 rally off the March lows has few historical comparables and 2009 is certainly the best fit both in terms of timing and magnitude."

While the index has exhibited similar trading tendencies as in its historical performance in 2009, DataTrek noted the internal differences between the S&P 500 then and the index now.

First, valuations are far apart. On Day 58 of the S&P 500's 2009 rally, the index traded at 10.4x trailing earnings, DataTrek said. Now the index trades at 19.6x trailing earnings.

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Second, sector allocations in the index are different today than they were 11 years ago. In June 2009, the technology sector had a weight of 18.4%. Today, when you include Google and Facebook, the index's weight in technology stocks is 32%, the note said. 

The energy-sector allocation is also different, DataTrek said. Back then, it was 12.4%. Today, it sits near 3%.

"Don't overthink it — 2020 is just like 2009," DataTrek concluded. The firm said that if the comparisons between 2009 and 2020 hold, "then the S&P 500 is set for a breather" in the short term.

From the 2009 rally's 58th day, the index didn't go anywhere for 34 trading days — but then the market continued its uptrend with a 17% rally from late July through the end of the year.

"If history repeats itself that would put the S&P at 3,588 on December 31, for an 11.1% price gain on the year," DataTrek said. A rally to those levels would represent record highs for the index and a 14% gain from current levels.

Read more: Schwab's global investing chief says the market's best-performing stocks are due for a surprising rotation for the first time in 12 years — and shares 3 ways to get ahead of the shift

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High-flying Enphase Energy stock tumbles 24% after short-seller alleges it 'fabricated' revenue (ENPH)

Wed, 06/17/2020 - 3:01pm

  • Enphase Energy tumbled 24% on Wednesday after a report from short-seller Prescience Point Capital Management alleged that the company "fabricated" much of its revenue.
  • Enphase Energy is a high-flying solar power company that has seen its stock soar as much as 10,700% from its 2017 low of 65 cents.
  • The short-seller alleged that "Enphase's regulatory filings cannot be trusted" and said it believes that up to 39% of the company's revenue is fake after it conducted its own private investigation into the company's operations.
  • Additionally, the short-seller, which has a short position against Enphase, highlighted that Enphase executives have sold nearly $121 million worth of ENPH shares since the start of June.
  • Visit the Business Insider homepage for more stories.

A high-flying stock that has soared as much as 10,700% from its 2017 low tumbled 24% on Wednesday after a short-seller issued a report that alleged the company "fabricated" much of its revenue.

Enphase Energy is a solar power company that sells a battery storage and solar power system that aims to help consumers lower their energy bills and reduce their reliance on electric utility companies, according to the company's website.

Prescience Point Capital Management, which has a short position against the company, claimed in its report that Enphase's meteoric rise over the past three years has been built upon financials that can't be trusted. The short-seller said it believes "that at least 39%, or $205.3 million, of Enphase's reported US revenue is fabricated."

Read more: Heath Jones is a US Army neuroscientist whose side hustle is scooping up real estate for passive income. Here's how he leverages a simple strategy for extra cash.

Short-sellers profit if the stock they are betting against goes down.

For its report, Prescience conducted on-the-ground interviews with former Enphase employees based in India. These former employees told the firm that "a large portion of Enphase's astronomical growth over the past two years is attributable to accounting gimmicks that artificially inflate revenue and profits," Prescience said.

Additionally, Prescience Point said it received data from about 70% of Enphase's US distributors that showed much lower growth than what Enphase has reported to investors.

Read more: Wall Street's best US and international stock-pickers have tripled their clients' money since 2010. The duo break down 5 future-proof companies that will keep investors ahead of the pack through 2030.

The short-seller also noted that since the start of June, insiders at Enphase have sold $120.9 million in stock. The insiders who sold stock include the chief financial officer, chief accounting officer, chief operating officer, chief commercial officer, and several directors at the company.

The share sales were not part of a 10b5-1 plan, which is a pre-scheduled trading plan used by corporate insiders to avoid the appearance of insider trading when they buy or sell stocks. 

A request for comment from Enphase Energy was not returned in time for publication. We will update the article if we receive a response from the company. 

Shares of Enphase fell as much as 24% to $39.82 in Wednesday trades. Despite today's decline, the stock is still up more than 130% over the past year.

Read more: BANK OF AMERICA: Buy these 13 cheap stocks that have unexpectedly strong finances, making them great bets for the next phase of the rally

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Goldman Sachs says renewable-energy spending will surpass oil and gas for the first time ever in 2021 — and sees total investment spiking to $16 trillion over the next decade

Wed, 06/17/2020 - 2:58pm

  • Green-energy investing will account for 25% of all energy spending in 2021 and, for the first time ever, surpass spending on traditional fuel sources like oil and gas, Goldman Sachs said in a Tuesday note.
  • Should the US aim to hold global warming within 2 degrees Celsius, the pivot to renewable energy sources will create between $1 trillion and $2 trillion in yearly infrastructure spending, the team of analysts added, or an investment opportunity as big as $16 trillion through 2030.
  • While past economic downturns halted efforts to lift clean energy initiatives, the coronavirus recession "will be different," the firm said.
  • Green technologies "are now mature enough to be deployed at scale," and the transition can benefit massively from cheap capital and "an attractive regulatory framework," according to Goldman.
  • Visit the Business Insider homepage for more stories.

The transition to renewable power from traditional fuels will create a $16 trillion investment opportunity through 2030 as spending shifts to new infrastructure, Goldman Sachs analysts said Tuesday.

The bank projects green-energy spending to pass that of oil and gas for the first time ever next year and account for roughly 25% of all energy spending. The share stood at just 15% in 2014, but a dive in fossil-fuel investing over the past decade shifted more dollars to clean energy initiatives.

If the nation aims to hold global warming within 2 degrees Celsius, the move toward renewable energy would create between $1 trillion and $2 trillion in yearly infrastructure spending, the team led by Michele Della Vigna wrote in a note to clients.

Economic downturns have historically slowed efforts to boost clean energy investing, but Goldman sees the coronavirus downturn bucking that trend and accelerating the nationwide pivot.

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"We believe this time will be different, especially for technologies that are now mature enough to be deployed at scale and can benefit from a falling cost of capital and an attractive regulatory framework, unlocking one of the largest infrastructure investment opportunities in history on our estimates," the team wrote.

The decade-long strategy isn't without its risks. Goldman warned that low cost of capital and an attractive regulatory framework are "essential" to moving green infrastructure forward. Such projects can be as much as three-times more demanding of capital and jobs compared to traditional energy developments.If either side of the public-private collaboration falters, the transition will slow dramatically, the bank said.

Read more: Wall Street's best US and international stock-pickers have tripled their clients' money since 2010. The duo break down 5 future-proof companies that will keep investors ahead of the pack through 2030.

Two-speed de-carbonization also poses a threat to the firm's outlook. Fiscal and monetary aid will likely boost mainstream clean-energy initiatives like solar and wind power. Yet growing technologies like clean hydrogen and the creation of carbon markets risk being placed on the back-burner.

If the latter efforts can't gain access to sufficient capital, the long-term plan to slash carbon emissions will stall, Goldman warned.

"This may ultimately delay the technological breakthroughs necessary to flatten the de-carbonization cost curve and achieve cost-efficient net zero carbon," the team wrote.

Now read more markets coverage from Markets Insider and Business Insider:

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Fed's Powell says bank's corporate-credit ETF purchases will give way to individual bond buying

Wed, 06/17/2020 - 2:53pm

  • The Federal Reserve's corporate-credit relief will move from exchange-traded fund purchases to taking in individual bonds, chairman Jerome Powell said Wednesday.
  • Targeted bond purchases are "a better tool for supporting liquidity and market functioning," Powell told the House Financial Services Committee.
  • The statement follows the central bank announcing Monday it would begin individual bond purchases.
  • The Fed's Secondary Market Corporate Credit Facility had only been taking in debt ETFs since it began operations on May 12.
  • Visit the Business Insider homepage for more stories.

The Federal Reserve will transition from its corporate-credit exchange-traded fund purchases toward targeting individual firms' bonds as it looks to further aid market functioning, chairman Jerome Powell said Wednesday.

The statement, made before the House Financial Services Committee, follows the central bank announcing on Monday its move into bond-buying with its Secondary Market Corporate Credit Facility. The relief program has been taking in ETFs since May 12 and kicked off its individual bond purchases on Tuesday.

"Over time we'll gradually move away from ETFs and move to buying bonds," Powell said. "It's a better tool for supporting liquidity and market functioning."

Read more: Schwab's global investing chief says the market's best-performing stocks are due for a surprising rotation for the first time in 12 years — and shares 3 ways to get ahead of the shift

The facility will buy up to $250 billion in corporate bonds and ETFs, while the Fed's Primary Market Corporate Credit Facility will directly take in up to $500 billion in debt offerings once it becomes operational. The central bank also announced Monday it would "create a corporate bond portfolio that is based on a broad, diversified market index of US corporate bonds," assuaging some concerns it would extend broad market relief unevenly.

The Fed's March 23 announcement that it would move into corporate-debt markets sparked a rapid turnaround for risk assets. Stock and bond valuations began a months-long rally that eventually placed the stock market within spitting distance of record highs. Before a single bond was bought up by the Fed, the S&P 500 turned year-to-date positive and subsequently fell below the key threshold on renewed pandemic fears.

Powell has repeatedly noted the SMCCF is primarily tasked with aiding market functioning, yet lawmakers in the Senate and the House of Representatives questioned the chair on whether such relief was still necessary. Investors quickly adopted risk-on attitudes after the Fed's March announcement, allowing firms to easily offer new debt. The chairman noted that market functioning has significantly improved and that the central bank will "put the tools away" once they're no longer needed.

"The markets are working," Powell said. "Companies can borrow, people can borrow. Companies are not showing tons of financial stress, and they're less likely to take cost-cutting measures." 

Now read more markets coverage from Markets Insider and Business Insider:

Hertz shares halted after SEC raises issues with plan to sell potentially worthless stock

Goldman Sachs says renewable-energy spending will surpass oil and gas for the first time ever in 2021 — and sees total investment spiking to $16 trillion over the next decade

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Schwab's global investing chief says the market's best-performing stocks are due for a surprising rotation for the first time in 12 years — and shares 3 ways to get ahead of the shift

Wed, 06/17/2020 - 2:52pm

  • The recent strength of international and value stocks relative to their US and growth counterparts could be unexpectedly persistent, said Jeffrey Kleintop, the chief global investment strategist at Charles Schwab.
  • Major transitions like these tend to happen at the start of new economic cycles, he added.
  • During a recent Business Insider webinar, he explained why investors should consider rebalancing their portfolios and shared three areas that could emerge as new market leaders. 
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Stock-market investors have been pricing in a recovery from the coronavirus crisis for a few months now. But a uniquely significant development occured mid-May. 

That was when investors transitioned from wagering on a long and painful comeback to seriously considering a snapback that blows past consensus forecasts for the economy. 

For proof of this game changer, look no further than the uptick in stocks that are most sensitive to the economy's gyrations. Cyclical stocks, which had largely ebbed and flowed, began a more convincing rally that showed investors were becoming more bullish.

The rebound lifted two groupings of stocks that contain many cyclicals: value stocks that are considered cheap relative to company fundamentals, and non-US stocks. For Jeff Kleintop, the chief global investment strategist at Charles Schwab, these gains are likely not short-lived flukes. 

He views the newfound leadership of value and international stocks as a moment of transition away from the last decade in which growth and US were the best performers. 

"If that's sustained — and I think it will be by the ongoing economic recovery – this new market leadership in the second half of the year could catch a lot of investors by surprise," Kleintop told Business Insider during a recent webinar

Read more: 'A textbook recession-recovery trade': 3 Wall Street stock-strategy titans explain why the market's latest plunge is actually 'healthy' — and share their views for what's next

Such a handover should not perplex students of history because it would mimic transitions that occured after the two most recent recessions.

In the run up to the dot-com bubble, growth and predominantly technology stocks outpaced value stocks. Value then took over and enjoyed its time in the sun in the years leading up to the 2008 financial crisis. And in the 12 years since then, growth has been the big winner. 

These handoffs between growth and value are illustrated in the chart below: 

A similar cycle has been in place between US and international stocks. Kleintop found that the regime change tends to coincide with the inversion of the yield curve, one of the most reliable indicators that an economic expansion is about to end.

Now that the economy is in another period of transition, Kleintop sees the wheels turning again. He acknowledged that his view is somewhat contrarian, given how strongly US-tilted and growth investors have performed over the past decade. 

"What do investors do when markets get difficult? They tend to backtrack," Kleintop said. "They look at old leaders and they expect them to be the ones that lead once again."

He does not foresee growth and US stocks performing terribly in the second half of the year and onwards. Instead, he says it is time to consider rebalancing your portfolio if it is stuffed with the old winners. 

He noted three areas that could emerge as new market leaders as the rotation runs its course:

  1. International stocks, which can be broadly acquired through the iShares MSCI EAFE exchange-traded fund
  2. Financial stocks that are represented in the Financial Select Sector SPDR exchange-traded fund.
  3. Industrials, captured by the Industrial Select Sector SPDR Fund.

Read more: 

SEE ALSO: How to navigate a chaotic market: Exclusive video discussion with 3 top Wall Street stock strategists

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Hertz shares halted after SEC raises issues with plan to sell potentially worthless stock

Wed, 06/17/2020 - 2:51pm

  • Hertz shares were halted on Wednesday morning after the Securities and Exchange Commission said it had issues with the company's planned stock offering.
  • The car-rental chain aims to sell as much as $500 million worth of stock in a fundraising effort, though it has said the shares could become worthless through bankruptcy proceedings.
  • "We have comments on their disclosure," SEC Chairman Jay Clayton told CNBC on Wednesday, adding that, in most cases, firms with such issues "do not go forward until those comments are resolved."
  • Hertz shares were frozen at $1.95, down slightly from Tuesday's close.
  • Watch Hertz trade live here.

Trading of Hertz stock was paused on Wednesday morning after the Securities and Exchange Commission alerted the firm to issues it had with a planned stock sale.

The car-rental chain filed for bankruptcy on May 22 and has since seen its stock price trade with outsize volatility as retail traders bet on a miraculous recovery. Hertz's latest fundraising plan involves selling up to $500 million in stock to take advantage of its recent rally. But the SEC has raised concerns about such a sale.

"In this particular situation, we have let the company know that we have comments on their disclosure," Jay Clayton, the chairman of the SEC, told CNBC on Wednesday. "In most cases when you let a company know that the SEC has comments on their disclosure they do not go forward until those comments are resolved."

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Hertz told sale participants in a filing on Thursday that "the common stock could ultimately be worthless" if the firm goes bankrupt, as bondholders and other creditors are first in line to see their cash returned. Selling stock at such a precarious condition is highly irregular.

Shares halted at $1.95, down 0.1% from Tuesday's close. Hertz stock had jumped as much as 21% earlier in the day before the pause.

Clayton said that Hertz was aware of the agency's issues, but he didn't specify whether the firm aimed to continue with the sale before addressing the concerns. The SEC's cautionary statement is relatively normal and doesn't require Hertz to cancel its sale.

Read more: Wall Street's best US and international stock-pickers have tripled their clients' money since 2010. The duo break down 5 future-proof companies that will keep investors ahead of the pack through 2030.

Hertz shareholders could also see their holdings turn worthless because of the New York Stock Exchange. The company received a delisting notice on May 26, four days after announcing its bankruptcy filing. Hertz appealed the notice, and shares will continue to trade publicly pending a hearing with the NYSE.

"There can be no assurance ... whether there will be equity value in the Company's common stock" should it be delisted, Hertz said in a regulatory filing last week.

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Mortgage applications to buy a home surge to the highest in 11 years as rates hit a survey low

Wed, 06/17/2020 - 2:50pm

  • Mortgage applications to buy a home spiked 4% last week to an 11-year high, the Mortgage Bankers Association said on Wednesday.
  • The jump in demand was likely fueled by falling mortgage rates — the fixed 30-year rate fell to 3.3%, the lowest in the MBA survey's history.
  • That led to a 10% spike in refinance applications as existing homeowners sought lower rates.
  • Read more on Business Insider.

Homebuyers are flocking back to the housing market as the US economy opens up from the coronavirus pandemic, fueled by record-low mortgage rates and pent-up demand.

Mortgage applications to purchase a home spiked 4% last week and were 21% higher than in the same period one year ago, the Mortgage Bankers Association said on Wednesday. The ninth straight week of gains in the purchase index pushed it to its highest level in 11 years, the report said.

"The housing market continues to experience the release of unrealized pent-up demand from earlier this spring, as well as a gradual improvement in consumer confidence," Joel Kan, the MBA's associate vice president of economic and industry forecasting, said in a statement.

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Falling mortgage rates added fuel to the homebuying fire — the average contract interest rate for the common 30-year fixed-rate mortgage fell to 3.3% from 3.8% in the week, representing a record low for the survey. Other measures of the 30-year rate have also recently dipped to record lows.

The record-low rates sparked a significant jump in refinancing activity, which had been falling in recent weeks. Last week, refinancing applications spiked 10% and are now a staggering 106% higher on the year, the MBA said.

"Refinancing continues to support households' finances, as homeowners who refinance are able to gain savings on their monthly mortgage payments in a still-uncertain period of the economic recovery," Kan said.

Read more: Wall Street's best US and international stock-pickers have tripled their clients' money since 2010. The duo break down 5 future-proof companies that will keep investors ahead of the pack through 2030.

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'Foolish to stand in the way': Fed support and the day-trading boom will drive stocks higher, an analyst says

Wed, 06/17/2020 - 2:50pm

  • Stocks will rise because the Federal Reserve and the day-trading boom are driving up prices, the Bianco Research chief James Bianco told CNBC's "Fast Money" on Tuesday.
  • The Fed's decision to buy individual corporate bonds has put a "massive floor on this market," Bianco said.
  • David "Davey Day Trader" Portnoy and his "retail bros" are piling into stocks because they're confident the Fed will shore up prices, making it tough to be bearish right now, Bianco said.
  • "You have to find something that says it's going to be so powerful to bring the market down that even the Fed's unlimited printing and the Davey Day Trader crowd buying like mad is not going to be able to stop it," he said.
  • Visit Business Insider's homepage for more stories.

Stocks will climb higher because the Federal Reserve is shoring up prices and day traders are buying without fear, James Bianco, the president of Bianco Research, said on CNBC's "Fast Money" on Tuesday.

The US central bank's unprecedented interventions — which now include plowing up to $250 billion into individual corporate bonds — have "put a massive floor on this market," the investment analyst said.

That safety net, combined with easy access to zero-commission and fractional trading across multiple platforms, has sparked a surge in retail investing, Bianco said. Notably, the Barstool Sports founder David Portnoy, who goes by the nickname Davey Day Trader, now captains an "army" of day traders, or "retail bros."

"When you talk to them or read the Reddit boards, the word 'Fed' always comes up — that they are not going to allow the market to go down," Bianco said.

Read more: Wall Street's best US and international stock-pickers have tripled their clients' money since 2010. The duo break down 5 future-proof companies that will keep investors ahead of the pack through 2030.

The combined forces of Fed Chair Jay Powell and Portnoy's trader platoons make it difficult to justify a bearish stance, Bianco continued.

"You have to find something that says it's going to be so powerful to bring the market down that even the Fed's unlimited printing and the Davey Day Trader crowd buying like mad is not going to be able to stop it, it's still going to fall," he said. "That's a high hurdle."

However, Bianco cautioned that stocks were already overvalued and that "there will be a reckoning somewhere down the line," for instance, if the economy reopens but fails to bounce back.

Read more: Schwab's global investing chief says the market's best-performing stocks are due for a surprising rotation for the first time in 12 years — and shares 3 ways to get ahead of the shift

Bianco made similar comments on CNBC's "Trading Nation" on Tuesday.

"This is a market that's destined to go higher," he said, adding that "we could have new highs before the end of the year."

Bianco, who moved entirely to cash in early March in response to the coronavirus threat, rationalized his shift from bear to bull.

"I did not appreciate what the Fed's actions to support the market were going to do to the retail community," he said.

Read more: Main Street traders have been crushing Wall Street in recent months. Goldman Sachs breaks down what retail investors should buy to keep winning — and lists the 12 stocks leading the charge.

"There's been a massive flood of money" from retail investors, he said, because they believe that markets "always go up, you can't lose, the Fed is there."

The retail inflows show few signs of stopping and threaten to inflate an already overvalued market, Bianco added. The frenzy could be halted by a second wave of coronavirus infections, a sluggish economic recovery, or a change in the Fed's behavior, he said.

But for now, he said, "I think it's foolish to stand in the way of it."

Read more: Famed short-seller Andrew Left lays out his methodology for finding the stock market's weakest links — and says he's terrified of newbie day traders that think they can outsmart Carl Icahn and Warren Buffett

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The global commercial payment market is worth $125 trillion and ready for a shakeup. Mastercard's new solution is setting out to modernize the industry.

Wed, 06/17/2020 - 1:45pm

  • Though digital technology has transformed many parts of the business landscape, commercial payments have been slower to adopt automation.
  • There are many benefits to automation, including improving cash flow.
  • Mastercard recently introduced Mastercard Track Business Payment Service, which allows buyers and suppliers  to more seamlessly connect and share payment-related data.

Digital technology has radically transformed many parts of the business landscape, but one key area has lagged far behind: commercial payments. Many companies still use paper checks, manage payment terms in spreadsheets, and manually reconcile invoices — all of which can lead to costly payment delays, confusion, and mistakes.

The past few months have only complicated the situation. More people are working from home, and businesses and their employees are adjusting to new processes, while trying to maintain and bolster their operations. Automating business payments can significantly improve cash flow at a time when many companies are cash constrained. One thing is clear: The $125 trillion global commercial payment market is due for a shakeup.

Last September, Mastercard outlined a vision to modernize business payments: It wants to eliminate paper-based processes for buyers and suppliers and improve how buyers and suppliers pay and get paid. The result is Mastercard Track Business Payment Service. Managed through a single, open-loop network, it allows buyers and suppliers to connect and share payment-related data using common rules and standards. As a result, buyers and suppliers don't waste time going back-and-forth about payment-related issues. Suppliers have access to rich, usable remittance data with every payment, reducing the number of inquiries they need to make to buyers and the amount of time they have to spend on reconciliation.

"Business-to-business payments are complex. Due to the lack of standardization and the bilateral nature of our ecosystem, there is a challenge for businesses to manage cash flow," says James Anderson, executive vice president of global commercial products at Mastercard. "It's time for commercial businesses to get value out of the accelerated digital shift through improved cash flow."

The cost of outdated processes

As business becomes faster and more global than ever, commercial payments have become increasingly complex. Customers and their payment partners have different systems and practices for accounts payable and accounts receivable, as buyers and suppliers are scattered across the world.

However, even as companies have leveraged technology to provide efficiencies in industries such as manufacturing and marketing, as well as many other areas, systems are marked by outdated communication methods — emails, phone calls, faxes, portals — that slow things down.

Accounts payable employees spend 30%1 of their time on manual tasks and answering payment-related questions. These inefficient, mistake-prone communication processes are costly and time-draining. Suppliers are left to make sense of information spread out between disparate systems for reconciliation. Every month, most suppliers have to log into more than 10 portals to retrieve critical data.2

These issues can have a dire impact on business growth. The lag between invoice-receipt and payment can delay delivery of goods and services, disrupt cash flow, and impact buyer-supplier relationships.  In fact, nine out of 10 business-to-business suppliers in the US reported frequent late payments by their customers2, with an average payment delay of 33 days — beyond the standard 30-day window.

Fraudsters have taken notice of the flaws in the current payment system as well. Inefficient processes and risky methods of sharing information contribute to the $3 billion in annual losses through business email compromise3.

Worldwide efficiency and security

Mastercard Track Business Payment Service drives efficiency for all parties in the transaction, with suppliers in particular gaining more control over their cash flow by systematically enforcing payment preferences and terms through parameters such as transaction size. They also receive the critical information they need for each transaction — rich, real-time data exchanges that enable simple and seamless reconciliation and revenue recognition.  For buyers, the solution improves working capital as it optimizes opportunities for card payment rebates, and early payment discounts. In addition, the solution satisfies the needs of global commerce, providing one connection for multiple payment types. The open-loop network allows for connectivity to many payment agents, payment types, and currencies across numerous countries.

Mastercard Track Business Payment Service also provides heightened security. Every enrolled business and agent receives a unique payment ID to codify transaction counterparties and safeguard sensitive bank account information.

Expanding around the globe

With the launch of Mastercard Track Business Payment Service in the US, Mastercard is now expanding it into Latin America, Europe, the Middle East, Africa, and Asia Pacific in 2020. Later this year, automated clearing house (ACH) payments will be added to the service and cross-border payments will arrive in 2021.

Digital technology has become intertwined with how people live, allowing them to pay bills, order takeout, and do countless other tasks simply by pushing a few buttons. It's long past time for business payments to enter the digital era, and for businesses to benefit from these same digital, simple, and seamless experiences.

Find out more about Mastercard Track Business Payment Service.

This post was created by Insider Studios with Mastercard.

1. B2B, How the next payments frontier will unleash small business, Goldman Sachs, 2018 2. Apex Analytix, 2017 Financial Leaders' Benchmarking Report 3. "Business E-Mail Compromise: Cyber-Enabled Financial Fraud on the Rise Globally," Federal Bureau of Investigation, February 2017

 

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MORGAN STANLEY: 12 tech trends are accelerating because of COVID-19 — and these stocks are most likely to benefit (AMZN, MSFT, AAPL, GOOGL, MS)

Wed, 06/17/2020 - 1:19pm

  • Morgan Stanley published a note on Wednesday identifying the 12 tech trends that are accelerating because of COVID-19 and the companies most likely to benefit from them.
  • The trends include a faster adoption of cloud services, wider use of e-commerce services, and the growth food-delivery apps.
  • Visit Business Insider's homepage for more stories.

The COVID-19 disruption has served as a wake-up call to many companies, as the pandemic is requiring a greater digital presence for businesses to succeed.

Retailers are scrambling to enhance their e-commerce offerings, while restaurants are beefing up their online delivery capabilities. Every company is now looking to add some kind of cloud service as more business is done remotely.

In light of this change, Morgan Stanley identified 12 of the most important tech themes to follow across technology, retail, food, and health sectors. While all of these trends were already under way before the COVID-19 pandemic, they've grown in importance amid the pandemic, the investment bank wrote in a note published Wednesday.

"These trends are likely to drive structurally higher investment in technology and prove sustainable long-term, as the benefits of digitalization last well beyond the pandemic," the note said.

Listed below are the 12 tech themes that Morgan Stanley believes are accelerating because of the COVID-19 disruption, and the firm's explanation for each trend (plus the companies most affected by it):

    1. Accelerating public-cloud adoption: "Leveraging the public cloud is becoming key for business survival as companies focus on improving connectivity during COVID-19. As a result 89% of CIO survey respondents (in March) signaled they expect to accelerate public cloud adoption." (AMZN, MSFT, GOOGL, CRM, WDAY, etc.)
    2. E-commerce: The two-year pull forward: "2020 is setting up to be an e-commerce inflection year as the combination of shelter-in-place, lower spend on experiences (dining out, bars, travel, etc), and gov't stimulus have driven dollars online." (AMZN, CHWY, EBAY)
    3. Accelerating contactless payments: "The market assumes that COVID-19-related adoption of digital payments is a nearterm benefit for Payments providers, offsetting some of the consumer spend headwinds. However, digitization of Payments is part of a multi-year secular growth driver in Payments, with COVID-19 as just the latest accelerator." (V, MA, PYPL, AAPL, LYV, etc.)
    4. Food delivery digs into restaurant total addressable market: "We see '20 as an inflection year within online food delivery, essentially pulling forward ~1.5 years of consumer spend and 3 years of penetration and while unit economics are improving, the potential entrance of JET complicates the push for consolidation/rationalization which we think is needed." (UBER, GRUB)
    5. Death of paper, rise of automation: "The flexibility to WFH has the potential to accelerate declines in the commercial printing market. The digitization of business processes is likely to compound these declines, but presents an opportunity for tech vendors that can offer digital experiences." (DOCU, CRM, NOW, APPN, MSFT, SMAR, etc.)
    6. Digital entertainment and network connectivity on the rise: "We believe COVID-19 and the increased demand for connectivity has amplified the importance of 5G network rollouts, for which we see mid-band spectrum as a critical catalyst, to support secular growth in categories including video and music streaming, and online gaming." (NFLX, SPOT, DIS, TMUS, AMT, CCI, etc.)
    7. Data as the differentiator: "COVID-19 is accelerating the digitization of workflow solutions which generates faster data growth and use of analytics, allowing businesses to derive data-driven insights, improve competitive advantages and profitability, and drive structurally higher IT spend." (VRSK, TRI, EFX, TRU, NVDA, etc.)
    8. Navigating tensions on the global trade map: "Trade tensions in semis lead to short-term challenges (volatile customer inventory behavior around tariffs and buffer stocking), intermediate-term challenges (Chinese customer preferences for non-US silicon) and longer-term challenges (incentives for countries to invest in competing supply chains)." (ST Micro, NXP)
    9. Collaboration tools: working together when working apart: "Our survey indicates a 2 year pull forward of the TAM as WFH drives demand for collaboration tools on the cloud and large platform players, particularly where the transition is more difficult (e.g. telephony, VDI, team collaboration)." (ZM, MSFT, WORK, TWLO, RNG, etc.)
    10. Ad spend shifting from offline to online: "We expect online advertising to recover faster than other ad verticals given its leading reach, return on investment and direct measurability, and see a significant opportunity to capture increased SMB ad spend with a push into social commerce." (GOOGL, FB, SNAP)
    11. Jump-starting the heartbeat of health tech: "We think investors don't fully appreciate the impact COVID-19 will have on accelerating big tech's entrance into healthcare. In the past 3 months we've seen a significant shift in consumer preferences towards digital health solutions, which we believe is here to stay. Regulatory barriers are also coming down, opening the door for new entrants." (AAPL, AMZN, GOOGL, MSFT, FIT, etc.)
    12. AR/VR to usher in a new medium for digital interactions: "COVID-19 should help expand AR/VR use cases because the need to interact at a distance has never been so mandatory, ushering in a whole new normal for how people will approach in-person interactions in the future." (AAPL, MSFT, GOOGL, FB, SNAP, etc.)

SEE ALSO: In a leaked document, Amazon employees shared stories of racism and gender discrimination while calling for a new leadership principle on 'inclusion'

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Apple hits record high as RBC upgrade says stock can climb 11% from current levels (AAPL)

Wed, 06/17/2020 - 12:50pm

  • RBC Capital Markets upgraded its Apple price target to $390 from $345 on Wednesday, an 11% jump from where shares currently trade. 
  • Apple shares rose nearly 1% to a fresh all-time high of $355.37 on Tuesday. 
  • On Tuesday, Citi also upgraded shares of Apple to a Wall Street-high of $400.
  • RBC's new price target comes after the firm did a deeper dive on Apple's share repurchase program. 
  • Watch Apple trade live on Markets Insider.
  • Read more on Business Insider.

Shares of Apple rose nearly 1% Wednesday, hitting a fresh all-time high of $355.37 in intraday trading. 

The move higher may have been driven by a group of recently boosted price targets for the Cupertino, California-based company. On Tuesday, Citigroup upped its price target to $400, a Wall Street high for Apple. 

RBC Capital Markets followed suit Wednesday, raising its price target on shares of Apple to $390 from $345, signaling that the stock could gain another 11% from current levels. The firm also reiterated its "outperform" rating on shares. 

RBC's new price target comes after the firm did a deeper dive on Apple's share repurchase program, which has a pace of about $70 billion annually. 

"AAPL remains in a league of its own when it comes to share repurchases," wrote RBC analyst Robert Muller in the Wednesday note. "While AAPL's significant capital return program is well known by the market, we do not believe the market is giving enough credit for the financial impact."

Because of its rapid clip of share repurchases, Apple can still grow earnings per share at an annual rate of about 3.5% in the next five years, according to RBC's estimates. This implies that the "potential uplift from the upcoming 5G upgrade cycle is being discounted by the market," Muller wrote. 

Read more: Wall Street's best US and international stock-pickers have tripled their clients' money since 2010. The duo break down 5 future-proof companies that will keep investors ahead of the pack through 2030.

In addition, RBC estimated that Apple has the runway to maintain its current buyback activity through mid-2023 with no organic growth, and could at that point repurchase shares at a rate of $5 billion annually without affecting its net cash position. 

To arrive at its updated  price target, RBC increased its target multiple for Apple to 24x from 21x applied to its calendar-year 2021 earnings estimate. 

"With the macro backdrop slowly improving following the initial COVID-19 pullback, and as the economy has begun to reopen, we believe we are justified in utilizing a multiple more in line with its high-tech peers," said Muller.

He added that the multiple still lags the median 29x of the "FAANGM" peer group, which includes Facebook, Apple, Amazon, Netflix, Google, and Microsoft. 

Apple has gained roughly 21% year-to-date.

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THE AI IN INSURANCE REPORT: How forward-thinking insurers are using AI to slash costs and boost customer satisfaction as disruption looms

Tue, 06/16/2020 - 11:02pm

The insurance sector has fallen behind the curve of financial services innovation — and that's left hundreds of billions in potential cost savings on the table.

The most valuable area in which insurers can innovate is the use of artificial intelligence (AI): It's estimated that AI can drive cost savings of $390 billion across insurers' front, middle, and back offices by 2030, according to a report by Autonomous NEXT seen by Business Insider Intelligence. The front office is the most lucrative area to target for AI-driven cost savings, with $168 billion up for grabs by 2030.

There are three main aspects of the front office that stand to benefit most from AI. First, Chatbots and automated questionnaires can help insurers make customer service more efficient and improve customer satisfaction. Second, AI can help insurers offer more personalized policies for their customers. Finally, by streamlining the claims management process, insurers can increase their efficiency. 

In the AI in Insurance Report, Business Insider Intelligence will examine AI solutions across key areas of the front office — customer service, personalization, and claims management — to illustrate how the technology can significantly enhance the customer experience and cut costs along the value chain. We will look at companies that have accomplished these goals to illustrate what insurers should focus on when implementing AI, and offer recommendations on how to ensure successful AI adoption.

The companies mentioned in this report are: IBM, Lemonade, Lloyd's of London, Next Insurance, Planck, PolicyPal, Root, Tractable, and Zurich Insurance Group.

Here are some of the key takeaways from the report:

  • The cost savings that insurers can capture from using AI in the front office will allow them to refocus capital and employees on more lucrative objectives, such as underwriting policies.
  • To ensure that AI in the front office is successful, insurers need to have a clear strategy for implementing the tech and use it as a solution for specific problems.
  • Insurers are still at different stages when it comes to implementing AI: a number of them need to find ways to appropriately build their strategies and enable transformation, while the others must identify how to move forward with their existing strategy.
  • Overall, incumbents should focus on a hybrid model between digital and human to ensure they're catering to all consumers.

 In full, the report:

  • Outlines the benefits of using AI in the insurance industry.
  • Explains the three main ways insurers can revamp their front office using the technology.
  • Highlights players that have successfully implemented AI solutions in their front office.
  • Discusses how insurers should move forward with AI and what routes are the most lucrative option for players of different sizes.

Interested in getting the full report? Here are two ways to access it:

  1. Purchase & download the full report from our research store. >> Purchase & Download Now
  2. Subscribe to a Premium pass to Business Insider Intelligence and gain immediate access to this report and more than 250 other expertly researched reports. As an added bonus, you'll also gain access to all future reports and daily newsletters to ensure you stay ahead of the curve and benefit personally and professionally. >> Learn More Now

The choice is yours. But however you decide to acquire this report, you've given yourself a powerful advantage in your understanding of AI in insurance.

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