National Write Your Congressman (NWYC) has found small business owners voicing high levels of optimism for the incoming administration's plans for the US economy and their own business prospects in its Q4 2016 Index. NWYC, an organization that gives small businesses a voice in American government, issued its Quarterly Index measuring small business owners and operators' sentiment towards Congress and their confidence in the US government.
The Q4 2016 Index found its membership of small business owners expect the most direct and positive impact on their 2017 business results from five specific components of President Trump's first 100 days agenda: tax reduction, health care reform, regulation relief, elimination of corruption and energy production.
The renewed sense of optimism is based on small business owners' opinions that the overall business climate, long-term success of their business and revenue growth will improve as new the administration takes power.
"Every day, NWYC listens to small business owners across the country and this quarter's Index shows what we hear in the field -- that owners are encouraged by President Trump's first 100 days agenda and have a specific mandate for their members of Congress," said Randy Ford president of National Write Your Congressman. "The uptick in our members' confidence in the fourth quarter of 2016 is encouraging as we work to make their voices heard to Congress."
NWYC's poll represents the opinions of more than 1,000 NWYC members across 46 states in the construction, services, manufacturing and agriculture industries.
"As the engine driving the US economy, small business owners are revved up for a powerful first quarter and NWYC will be working alongside our membership of construction workers, farmers, machinists and financial service providers to make sure their voices and opinions are heard by Congress," said Ford.
(Source: NWYC)
The Dow Jones index broke through the 20,000 mark for the first time yesterday, as markets continue to respond to the potentially stimulative economic policies of the new US President. The Dow Jones now stands at over three times the low it reached in March 2009, when it traded at a touch over 6,600 points.
The Shiller CAPE ratio, one of the most widely-used measures of valuation for the US stock market, currently stands at 28.46, its highest level for 15 years. However it’s worth noting that it has been as low as 4.78 (December 1920), and as high as 44.20 (December 1999).
Meanwhile bonds yields have been on the rise recently, as investors brace themselves for further US interest rate hikes and the potential for fiscal stimulus and increasing trade tariffs to fuel inflation. The US 10 year Treasury is now yielding 2.5%, compared to 1.6% six months ago. The UK 10 year gilt has gone from yielding 0.8% six months ago to 1.5% today.
Laith Khalaf, Senior Analyst, Hargreaves Lansdown commented:
‘The Trump jump has propelled the Dow Jones to an unprecedented level, as investors pile into US stocks in anticipation of lower corporate taxes and more government spending. Meanwhile expectations of further interest rate rises in the US, and the potential for inflationary fiscal stimulus, has been putting upward pressure on bond yields in the last few months.
Stock indices in the US and UK may well be at or near record highs, however when the earnings generated by companies in these markets are factored in, stock valuations show neither the extreme pessimism of 2008, nor the irrational exuberance of 1999. This means they are trading somewhere in the middle of their range, so are neither exceptionally cheap or hideously expensive. In the short term the stock market could move in either direction, but for long term investors it still makes sense to keep a healthy slug of their portfolio in equities.
Meanwhile bonds have come under pressure of late, as it looks like the US central bank is in the mood to raise interest rates this year. However there have been many false dusks for the bond market, which has defied expectations since ultra-loose monetary policy was initiated all those years ago in response to the financial crisis. Central banks in the UK, Europe and Japan are still engaged in stimulative activity, and while the US Fed is starting to push in the opposite direction, it’s likely to err on the side of caution lest by raising rates too soon it damages the US economy, and propels an already strong dollar even further upwards. While the best days for the bond market may be behind us, there‘s no sign that interest rates are going to return to pre-crisis levels any time soon, which acts as an anchor on rising yields.’
(Source: Hargreaves Lansdown)
As the new US President settles in, Zillow finds the value of the White House has appreciated 15% since Barack Obama's inauguration in 2009.
The White House, valued at $397.9 million has appreciated 15% since the Obamas moved in eight years ago. The White House is the most valuable home on Zillow’s valuation list.
President-elect Donald Trump will be the 44th President to move into the 55,000 square-foot home(ii). Unlike some past presidents, luxury living is not new to Trump, who is moving from his three-story penthouse in The Trump Tower to one of the most famous homes in America.
The value of the White House, currently at its peak, is expected to appreciate 3 percent over the next year, in line with home value growth expected throughout Washington, D.C. Home values across the country have appreciated 6.5 percent over the past year and 9 percent since Barack Obama's inauguration in 2009.
"President-elect Trump is moving into one of the most famous homes in the country -- and, according to Zillow, it's also the most valuable home in the country," said Zillow Chief Marketing Officer Jeremy Wacksman. "President Obama's term coincided with a massive recovery of the US housing market, and that's reflected in the updated value of the White House. Home values across the country are growing at their fastest pace since 2006, with many markets setting new records -- one of the reasons why the White House is worth more now than it has ever been."
The White House has 132 rooms, 32 bathrooms and sits on 18 acres. Notable features include basketball and tennis courts, a sun room and a library, all of which influence the home's Zestimate. Were a potential buyer to take out a standard 30-year fixed mortgage on the White House today, the monthly payment would be about $1.6 million(iii), according to Zillow. The monthly rental payment would be just over $2 million per month.
(Source: Zillow)
2016 has been quite a year for global property markets. China’s slowdown, the impeachment of Brazil’s president, the Brexit referendum in the UK and the US presidential election have all contributed to a rather tumultuous year. Will property markets fare any better in 2017? And where precisely are the hotspots that bear watching as the new year unfolds? Ray Withers, CEO of Property Frontiers reveals all…
UK – era of the staycation
In 2009, during the height of the recession, UK residents made 15.5% fewer overseas trips and 17% more domestic trips. Since then British holidays are still gaining in popularity: the number of domestic trips in 2015 was up by 11% on the previous year. The Brexit referendum’s repercussions may well change how we experience summers to come. This is the new era of the staycation.
While residential rental yields are likely to remain strong (outside of London), with so many unknowns house price changes remain tricky to forecast. For UK property investing in 2017, we believe that holiday homes, coastal cottages, and hotels will be popular with investors looking for a favourable stamp duty environment, high yields and insulation from market uncertainty. To maximise returns, look for regions with natural or cultural appeal, unflagging visitor numbers, and an undersupply on the hospitality market.
UK – the hangman loosens the noose on landlords
Philip Hammond’s 1994 election material slipped in a humdinger: ‘hanging for premeditated murder.’ The question is: when it comes to fiscal policy impacting landlords, will the new Chancellor play the hangman or the handyman?
With rock bottom mortgage rates and rent increases of 19% forecast for the next five years, it is still a good time to be a landlord. The lack of supply on the market could well spell a good opportunity for investors. University towns like Bristol and Cambridge and secondary cities like Liverpool, Manchester and Sheffield should remain on the radar for strong yields next year.
Europe – secondary cities withstand shaky politics
Europe’s fractious politics will have a big year in 2017. For an early indication of how those decisions might affect property markets, look to Italy and Austria in the aftermath of their December 2016 votes. The defeat of Renzi’s constitutional referendum in Italy, for example, could cause problems for struggling banks and infect the wider economy, including impacting mortgage lending.
The victory of the liberal over the far-right candidate in Austria’s presidential election, however, favoured stability and European integration. Given that Vienna is unlikely to end its seven-year streak atop Mercer’s global quality of living ranking and its housing market is just 20% owner occupied, the result may well safeguard the city’s growing reputation as a buy-to-let hotspot.
Other cities we think merit attention for high yields in 2017 include Lisbon (thanks to tech clusters and the historic centre), Utrecht (enjoying the Netherlands’ continent-beating 6.57% yields but without Amsterdam’s bubbly prices), and Barcelona (still down on its peak, with growing business appeal).
Europe – Brexit’s beneficiaries?
When (if?) Britain triggers Article 50 in 2017, will we see bankers transfer en masse from London to Amsterdam and startups relocate from Manchester to Hamburg? While large scale migrations are unlikely, the pressure will be on for British cities to reassert their global appeal if the property market is to bounce along at 8% growth again in 2017.
European cities will be putting up a strong fight, and battling to skim off what talent they can. Frankfurt and Paris will make particularly aggressive bids, but they will need to need to drastically improve their supply of office space if they are to become truly viable alternatives.
We may see a new trend for Brits doubling up their holiday or retirement homes as tickets to visa-free travel. Spain and Portugal could see a steep upswing in applications for their ‘golden visas.’
North America – punching above its weight?
The US rocketed past the UK as the stage for the biggest political upset of 2016 with the election of Donald Trump. The S&P Case-Shiller home price index ends the year at a new record peak and such punchy growth will likely continue into 2017. Even if the market proves to be overheated, more responsible lending means a sub-prime-scale implosion is a very distant possibility.
The other theme of US house price growth, its patchy distribution, may also become more pronounced. New York home values appear comatose in comparison to Portland and Seattle, where prices grew by 12% and 11% respectively in the year to September. Yet lunatic price hikes across the border in Canada, make even those numbers look comparatively demure; Toronto closes out 2016 leading the Teranet and National Bank of Canada index with an insane growth rate of 34.6%.
Further afield
South America may become a less daunting investment prospect in 2017, with Brazil and Argentina poised to shake off the political deadlock of last year and Colombia coming closer to peace. Our pick for an enticing investment target is Peru, where a new business-friendly government could revive the property boom and Lima’s hotel market should benefit from fast-growing visitor numbers, a generous tourist spend, and limited supply coming on to the market.
In Africa and the Middle East, the price of oil has played havoc with economies. Property markets could well see a boost if the price of oil rallies in 2017. This could benefit countries like Ghana and Uganda, where the economies are sufficiently diversified to avoid the pitfalls that accompany surprise discoveries of oil. Land development is already rife in their respective capitals of Accra and Kampala.
Investors have been glued to Iran’s gradual unfurling onto the global stage and will continue to look on in 2017, though caution is advised until President Trump’s official stance makes itself clear.
In Asia, Indonesia and Vietnam are making encouraging moves to attract foreign investors, and boast the economic growth to back it up. 2017 will be crucial for testing how well these new rules work in practice, and early birds who plan appropriately could catch the juiciest worms.
China might decide to employ state intervention for the forces of good to re-jig its land imbalance and loosen the notoriously prohibitive hukou residency permit system. This would allow demand and supply to better align and let some steam out of the Chinese property market’s swelling paper lantern.
Finally, our client database reveals a growing share of Indian investors contending with their Chinese counterparts as the dominant group of family buyers casting a wider net for safe havens overseas. Though the UK has not lost its appeal, we might expect to see them target regions closer to home as traditional Western markets start to feel more volatile.
(For more information please visit Property Frontier)
Dr. Laura Simmons, Senior Advisor, Cornerstone Research
A Cornerstone Research report released at the end of March shows that total settlement dollars in securities class actions hit their lowest mark in 16 years in 2014. The average settlement amount also reached its lowest level since 2000, according to Securities Class Action Settlements—2014 Review and Analysis.
Total settlements dropped to $1.1 billion (€1 billion), from $4.8 billion (€4.4 billion) in 2013, primarily due to a lack of large cases. The largest settlement amount in 2014 was $265 million (€246 million), compared with $2.5 billion (€2.3 billion) in 2013. According to the report, the number of settlements remained largely unchanged last year at 63.
The report also examines ‘estimated damages’, the most important factor in predicting settlement amounts.” Average “estimated damages” decreased 60% from 2013 and were 70% lower than in 2012.
“Since stock price movements are fundamental to damages calculations, lower ‘estimated damages’ may stem from the reduced stock price volatility during the years when many of these cases were filed,” said report co-author Dr. Laura Simmons, Senior Advisor in Cornerstone Research’s Washington office. “And, as the market has remained relatively stable on the whole in 2013 and 2014, it suggests that this trend of lower ‘estimated damages’ for settled cases may continue.”
In addition to lower average ‘estimated damages’, a smaller proportion of large cases involved third-party defendants and public pensions as lead plaintiffs, which contributed to the lower level of settlement amounts. Both of these factors are typically associated with higher settlements.
The Bank of New York Mellon has been hit by a $714 million (€660 million) settlement on accusations of FX manipulation, which resulted in it defrauding government pension funds and investors for more than a decade.
The settlement is part of a broader deal which will see the bank laying off some employees and reworking its foreign exchange operations.
The settlement was struck by the US Attorney in Manhattan and the New York Attorney General and focuses on what the authorities called a ‘fraudulent business model’. The bank claimed to offer clients the best foreign exchange rates ‘free of charge’ but instead offered them lower rates and imposed ‘undisclosed fees’. BNY Mellon secured the gains from better exchange rates rather than passing the gains onto its customers.
“Bank of New York Mellon have admitted to essentially lying outright to their clients to line their own pockets. The most concerning factor is that BNY Mellon’s misconduct was outed by a whistle-blower, which begs the question, how many cases such as this happen where there is no one to lift the lid?” said Philippe Gelis, CEO and Co-Founder of Kantox, a business foreign currency exchange.
“Claims of offering the best FX market rate are ubiquitous in the sector, and so, the only way to ensure they do indeed get the best market rate, companies must benchmark their bank against the live mid-market rate. This is not just another foreign bank being fined in a foreign country by a foreign court, but a warning of malpractice that could be carried out by any bank or broker that does not display live rates transparently."
Robb Hilson, Small Business Executive at Bank of America
Small business owners in the US are feeling buoyant about the national economy, with many feeling positive about health of the economy and their potential for economic growth, according to the latest Bank of America/CFI Group Small Business Forecast.
Small business owners rated the health of their local economy 20% higher than they did in August 2014. In addition, they are 14% more optimistic about their potential for economic growth over the next six months. Overall, the small business owners’ satisfaction/optimism index moved from a 69 to a 70, on a scale of 1-100.
“Entrepreneurs are feeling the effects of an improving economy and they believe 2015 will be a strong year for small businesses,” said Robb Hilson, Small Business Executive at Bank of America. “Economic optimism is running high, and we’re excited to see how small business owners’ enthusiasm and increased confidence will shape their plans for long-term business growth.”
When asked to assess the health of their small businesses, 37% of respondents said small businesses are doing ‘well’ or ‘very well’, up from 27% in August 2014. On the flip side, just 15% feel the health of their small business is ‘poor’ or ‘very poor’, compared to 21% who shared those responses six months ago. Similar to previous findings though, entrepreneurs aren’t making immediate changes to their business just yet and are still taking a relatively cautious approach to growing in terms of hiring and investment.
The financial environment is also primed to support small business growth, with small business owners rating their access to credit up 7% from six months ago. Small business owners also reported a better cash flow position for their business, with research indicating a 4% improvement from the previous study.
Millennials tend to be the most positive about the future of their business, scoring 80 out of 100 in the Optimism category, with Gen-Xers scoring 73 and boomers 67. They are also the most confident about the state of the economy (58 out of 100), while boomers are more negative (49). This was similar to findings in the fall 2014 Bank of America Small Business Owner Report. In addition, millennials are also most likely to plan to grow their business (65 out of 100), followed closely by Gen-Xers (61).
Rob Fisher, PwC’s US technology deals leader
With 2014 noted for a series of record-setting and transformative deals, momentum is expected to carry over into 2015 as dealmakers continue to invest in cloud, mobile and security, and seek out emerging technologies such as Internet of Things (IoT), according to PwC’s US Technology Deals Insights 2014 Year in Review and 2015 Outlook report.
“2014 closed with technology deal activity not seen since the dot com era, thanks to a record number of billion dollar transactions and a resurgence of mid-market deals,” said Rob Fisher, PwC’s US technology deals leader. “As we consider the almost $350 billion (€312 billion) in cash and securities on hand at the top 25 technology companies, record levels of private equity funds waiting to be deployed and projected full pipelines from every angle of the market, 2015 promises to be another active and exciting year for technology M&A.”
According to Deal Insights, cumulative technology deal value for 2014 closed at $161.4 billion (€144 billion), a 62% increase over 2013, which had a total deal value of $99.8 billion (€89 billion). Average deal value grew to $583 million (€521 million), compared to $489 million (€437 million) in 2013.
Technology IPOs continued to remain a key market driver and reached their highest levels since the dot com era. Even excluding the single largest IPO, valued at nearly $22 billion (€19.6 billion), IPO value increased 40% and volume increased 18% over 2013. In total, there were 60 technology IPOs, an increase over the 51 posted in 2013, making 2014 the most active year since 2000.
The IMF has cut its global growth forecast for 2015 to 3.5%, down 0.3% from its October prediction. It expects a lower oil price to be positive for the global economy, but to be offset by negative factors.
The IMF believes a lower oil price will stimulate more growth in advanced economies that import oil rather than in emerging economies, as the benefit feeds more directly through to consumers. In many developing nations, like India, the government subsidises energy consumption, therefore the government tends to benefit from price drops.
However, the IMF believes the US will see strong growth in 2015, helping push the global economy upwards. The US is forecast to see 3.6% growth in 2015, up 0.5% from the IMF’s October forecast.
Meanwhile the IMF sounds notes of concern over Russia, and China. The Russian economy is expected to contract by 3% in 2015, while China is expected to grow by 6.8%, a 0.3% reduction from October's forecast. This follows on official data just released showing Chinese growth slowed to 7.4% in 2014, an enviable level of growth for advanced economies, but its lowest level in 24 years.
European growth has been downgraded and is now expected to come in at 1.2%, down 0.2% from October. However, Spain provides a European bright spot, with 2% growth expected this year, up 0.3% on October's forecast. The UK is expected to grow by 2.7% in 2015, unchanged from October.
“Economic forecasts of this nature are more like a dowsing rod than a GPS tracking system, but they do confirm what market behaviour suggests- that uncertainty has increased in recent months,” said Laith Khalaf, Senior Analyst for UK-based financial service company Hargreaves Lansdown.
“The falling oil price is of course a major source of instability, though as the IMF notes this should be a boost to global economic activity, albeit with winners and losers.
“The US remains teacher's pet, with the growth forecast for the world's most influential economy revised sharply upwards. At the other end of the spectrum Russia is expected to suffer a 3% contracting in its economy over 2015, as a result of its high exposure to oil and gas production.
“While the IMF strikes a largely negative tone, stock markets have already absorbed much, if not all of the information referred to in these forecasts. For instance Russian and Chinese stocks are already looking relatively inexpensive by historical standards, while US companies are more fully valued, reflecting the respective conditions and confidence in these economies.”
Nearly half of CFOs expect the US economy to improve during the next six months and only 9% expect it to worsen, according to the Grant Thornton LLP 2014 Fall CFO Survey. The biannual survey reflects the insights of more than 1,000 CFOs and other senior financial executives across the US.
The survey’s findings indicate that economic optimism has remained stable during the past year despite increasing global uncertainty. In spring 2014, 51% of respondents expected the economy to improve during the next six months, compared to 40% in fall 2013 and 45% in the firm’s spring 2013 survey.
The most common growth strategies for businesses in the upcoming year include pursuing organic growth in existing markets (87%) and introducing new products or services (72%). In addition, more than one-third (37%) of companies are considering a merger or acquisition in the next 12 months. For companies with more than $5 billion (€4.2 billion) in annual revenue, that number is even higher at 60%.
“While it’s encouraging that CFOs aren’t expecting contraction, they’re not predicting significant growth either,” said Stephen Chipman, Chief Executive Officer of Grant Thornton. “It’s vital that our country’s political leaders focus now on resolving this uncertainty by advancing comprehensive tax and entitlement reforms to spur economic growth.”
The notion that US economic optimism remains stable amidst increasing global uncertainty correlates with other recent research from Grant Thornton. The Grant Thornton International Business Report found that optimism for the nation’s economic outlook among US business leaders remained strong at a net balance of 69% in third quarter 2014 while Eurozone optimism dropped to a net balance of 5%, down 30 percentage points from the previous quarter. In particular, German optimism plummeted 43 percentage points to 36%.
“The economic environment in Germany has very significant implications for the US economy and businesses,” added Mr. Chipman. “We have yet to realise the domestic repercussions of the weakening Eurozone and will be watching the situation closely in the coming months.”
As at December, 2014 had seen 288 IPOs on US exchanges, amounting to $95.2 billion (€80.8 billion), a 54% increase in capital over 2013, according to the latest EY Global IPO Trends: 2014 Q4 report.
While 2013 saw a revival of IPOs in the US, 2014 was even more exceptional, according to EY. As of December, the number of listings was at its highest point since 2000 and a 27% increase over 2013.
While Q4 saw a pause in the markets after the Alibaba listing, IPO investments still remained strong throughout the end of the year given the lack of alternative investment options and low interest rates. In addition, with stock markets trending higher, IPOs outperformed market indices. Companies that listed on US exchanges in 2014 saw average year-to-date returns of 27.8%, compared to the S&P 500 at 12.2%.
“Concerns this is a 2000-like bubble are overplayed,” said Jackie Kelley, EY Global and Americas IPO Leader. “Companies coming to the public markets are well-led, well-priced and have a good story to tell. Their stocks tend to outperform the market attracting solid investor interest.”
Global IPO activity also gained momentum with 1,206 IPOs, which raised $256.5 billion (€218 billion). “This was the best year for IPOs since 2011,” said Ms. Kelley.
In addition, PE- and VC-backed exits were the most significant driver of US IPO activity. A total of $68.2 billion (€58 billion) was raised via 181 financial-sponsored IPOs and accounted for 72% of US IPOs by value and 63% by number.
The success of the Alibaba listing encouraged more cross-border activity, with the majority coming from Europe (26), China (16) and Israel (12). Cross-border activity still remains strong in the US, which accounts for 52% of cross-border deals globally by number and 80% by capital raised throughout 2014.
“In 2014, the US attracted more cross-border IPOs than any other region and its stock exchanges led the world in terms of deals and capital raised. In addition to strong IPO valuations on foreign listings, the growing familiarity with US accounting regulations, the overall strength of the US markets and the access to capital are likely to encourage more cross-border IPOs on US exchanges in 2015,” said Ms. Kelley. In addition, the US hosted more foreign IPOs in 2014 than any other market, with 67 IPOs raising $40.8 billion (€34.6 billion).
This year looks set to be another strong trading year, according to EY. The firm reported that there is a pipeline of 100 companies ready to list in 2015, of which 60 are expected to go public and raise around $22 billion (€18.6 billion) in Q1 2015.
BP's business activities in the US helped generate close to $143 billion (€121 billion) in economic impact in 2013 and currently support nearly 220,000 American jobs, according to the company's recent US Economic Impact Report 2014.
Released early January, BP's new report provides a detailed, state-by-state look at the breadth and impact of the company's activities in America. Since 2009, BP has invested nearly $50 billion (€42 billion), making it America's largest energy investor. In 2013 alone, BP spent $22 billion (€18.6 billion) with vendors across the country on products and services, ranging from offshore drilling rigs to gasoline-producing equipment for its refineries.
“No energy company has invested more in the US over the past five years than BP,” said John Mingé, BP America Chairman and President. “Our investments not only provide the energy to power the nation, but they also support hundreds of thousands of jobs that fuel the economy.”
BP's business investments in the US include oil and natural gas exploration and production, fuel and chemical refining, lubricants, shipping, trading, renewable energy production and technology research and development. The US also is home to a number of operations that serve BP's global businesses, such as the Centre for High-Performance Computing in Houston, which houses the world's largest supercomputer for commercial research. Nearly 40% of BP's publicly traded shares are also held in the US.
