The World’s Richest Investors Are Preparing For Stocks To Fall Significantly In 2020

Plus, the Disney+ release was plagued by technical errors this morning, and America’s biggest milk producer declared bankruptcy.

Stocks were higher to start Tuesday with the Dow adding 45 points, or 0.2%. The S&P 500 and Nasdaq both gained 0.4%, with the Nasdaq reaching a new all-time high.

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The major indexes edged higher this morning as investors awaited a lunchtime speech from President Donald Trump. Trump is scheduled to speak at the Economic Club of New York later today where he is expected to give clues as to the status of ongoing trade talks between the U.S. and China as the world waits to hear of plans for signing the phase one trade deal. Trump’s speech comes just a day before the self-imposed deadline on whether or not to add tariffs on imports of automobiles and auto parts from the European Union and Japan, though it has been reported that the president is likely to push back this deadline by six months.

The world’s richest individuals are expecting the market to drop significantly before the end of next year. That’s according to a report from UBS of more than 3,400 high-net worth investors, 55% of which believe the market will fall at some point in 2020 amid intensifying geopolitical risks. Survey respondents said they have upped their cash holdings to 25% of their average assets. “Investors see reasons to be cautious in the new year,” said UBS Global Wealth Management’s client strategy office. “Two in three global investors believe markets now are driven more by geopolitical events than business fundamentals such as profitability, revenue, and growth potential.” UBS client strategy officer Paula Polito added, “The ra[idly changing geopolitical environment is the biggest concern for investors around the world. They see global interconnectivity and reverberations of change impacting their portfolios more than traditional business fundamentals, a marked change from the past.”

Disney launched its Disney+ streaming service this morning, but was hit by technical errors just hours after its official launch as users rushed to download the new service. “The consumer demand for Disney+ has exceeded our highest expectations,” said a Disney+ spokesperson. “While we are pleased by this incredible response, we are aware of the current user issues and are working to swiftly resolve them.” Frost & Sullivan principal analyst Dan Rayburn pointed out that streaming services often struggle when a surge of people try to watch at the same time. “It’s hard because of the complexity of the workflow and doing it at scale,” Rayburn said. “If in the next two or three hours everything is cleared up, it’s not that big of a deal. If this continues throughout the day, this is a real problem.”

The biggest milk producer in the U.S. announced it has filed for Chapter 11 bankruptcy protections this morning. Dean Foods said it plans to use the Chapter 11 proceedings to keep running its business as well as address debt and unfunded debt obligations as it seeks to sell the company, and has already secured commitments for $850 million in debtor-in-possession financing. The company said that it is in “advanced discussions” with Dairy Farmers of America about selling all of its assets. Dean Foods has struggled as consumers have switched to non-dairy milks or private-label products, and as it has lost contracts with Walmart and Food Lion in the last few years. 

Shares of Rockwell Automation are up more than 12% this morning after the company reported an earnings beat and offered better-than-expected guidance for 2020. The company reported a profit of $2.01 per share, on sales of $1.73 billion, beating analyst estimates of a profit of $1.92 on sales of $1.65 billion. “Our broadening portfolio helped deliver better-than-expected performance in the quarter,” said CEO Blake Moret in a statement. “We continue to find new ways to increase productivity for our customers as we play a larger role in their digital transformation journey.”

Stocks We’re Watching

Durect Corporation (NASDAQ: DRRX): Shares of this biopharmaceutical jumped nearly 14% yesterday after Durect announced results from its Phase 2a clinical trail of its DUR-928 candidate for the treatment of alcoholic hepatitis (AH). “The results of this study are remarkable and much was learned from this Phase 2a clinical trial,” said Dr. Tarek Hassanein. “The low Lille scores, the early reduction in bilirubin and the number of severe AH patients who were able to be discharged after a single dose of DUR-928 is striking and the safety profile looks very promising as well.”

Kadmon Holdings (NYSE: KDMN): Kadmon shares are up more than 14% today after the biopharmaceutical company said that its treatment for certain patients with chronic graft-versus-host disease—a rare condition that can occur after a transplant—met the primary endpoint in a recent trial. The company plans to share the data with the FDA and submit it for presentation at a medical conference in the future, and also expects to file a U.S. marketing application next year.

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