Why do tax cuts, earnings season and technology investments affect the markets and individual investors? (Reading time 4:00 mins)

This information does not take into account your personal objectives, financial situation or needs. You should consider if the relevant investment is appropriate having regard to your own objectives, financial situation and needs.


1. Trump’s tax plan

The Trump administration released its tax reform plan last month, eliciting a positive response from financial markets due to the proposed corporate tax overhaul.

While it will likely be some time before the tax cut plan passes, investors and politicians (mainly Republicans) alike believe it would boost economic growth.

What does this mean if you’re invested in the stock market?

Lower taxes mean profitable companies will have more cash to do other things. Usually this means spending more money on growing the company, or perhaps paying more dividends. Both are typically good news for share prices and the stock market.

The key question is whether the Trump administration can get these tax reforms passed through Congress and the Senate – particularly after recent spectacular failures on healthcare reform. We think the market is still holding its breath but if lower corporate taxes do become a reality, the stock market should go up.

What does this mean if you’ve invested money with AtlasTrend?

All AtlasTrend’s managed funds have some of their money invested in US shares. If the US corporate tax is lowered, then it should be good news for those shares. We see this as more of a “bonus” because AtlasTrend never invests in a company on the belief that taxes will be lowered.

Why? Because tax policy is not something any individual company can influence. We invest in what we believe to be great companies that will do well in the long term because people want to buy their products or services. We don’t invest to speculate on tax changes.


2. An optimistic earnings season

Q3 earnings season has been on a roll so far, with investors hotly anticipating the release of earnings from technology giants like Amazon and Facebook this week.

As the results start streaming in, everyone will be looking out for who beat expectations or is lagging behind. If the recent reports are anything to go by, earnings growth might be on the horizon.

What does this mean if you’re invested in the tech companies?

Since tech shares have contributed to the strong stock market performance this year, investors will be keeping a close eye on these reports.

Remember, the market is usually concerned about the future and not the past. If these tech giants make positive statements about their future earnings prospects and the industry in general, it will help to boost the stock market even more. On the other hand, if these companies start to sound cautious, it will have the opposite effect.

What does this mean if you’ve invested money with AtlasTrend?

The AtlasTrend Big Data and Online Shopping Spree Funds are invested in a number of global technology companies. Our investment team will be analysing their earnings reports very closely and sharing their thoughts with all AtlasTrend members.

One thing to remember is AtlasTrend is a long-term investor. Just because one quarter of earnings might be positive or negative, doesn’t automatically mean it will be positive or negative for the next decade.

Our strategy is not to overreact to short term earnings announcements because that can cause serious long term pain. Instead, we gather and analyse multiple data points to really understand whether the quarterly earnings reports still support our long term investment decisions.


3. Google’s Uber Break-Up

Google’s relationship with Uber has been unravelling for some time despite initial investment in the ride-sharing service in 2013.

They’ve added salt to the wound by investing US$1 billion in Lyft (Uber’s rival) last week. Google’s parent company is placing their bets on Lyft being the leading mobility provider for autonomous vehicles.

What does this mean if you’re invested in Google?

Alphabet (the parent company of Google) makes nearly all its money through providing search and digital advertising.

Being an incredibly innovative company, it also has a division called “Other Bets”. The division has billions of dollars invested in new technologies that, if successful, will become the next game changer.

Google’s investment in Lyft is part of its “Other Bets”. Although Uber is the dominant player in the industry, the market opportunity is huge as only 0.5% of all distance travelled in the US is on ride-sharing services. We think Google has made a smart bet with Lyft particularly given the recent management issues at Uber.

What does this mean if you’ve invested money with AtlasTrend?

The AtlasTrend Big Data Fund is invested in Alphabet shares. If you’re invested in that fund, you’re indirectly invested in Lyft through Google’s investment in that company.  

Exciting, right?

We don’t expect Lyft to be a major contributor to Google’s earnings anytime soon but one day if it is successful, this “Other Bet” might power Google’s earnings for more decades to come. We believe Google has struck the right balance between growing its core digital and search advertising business, and investing money in new technologies to ensure it will lead transformational world trends.


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About Kent Kwan

Kent Kwan is a Co-Founder of AtlasTrend, an investment platform that makes it easy for anyone to learn and invest in trends impacting our world. Kent has over 17 years experience in financial markets including as Chief Investment Officer at Arowana International Limited, and roles at JP Morgan and Macquarie.