President Donald Trump said on Monday that China is ready to come back to the negotiating table and the two countries will start talking very seriously.Politicsread more
The escalating trade war between Washington and Beijing dominated discussions at the G-7 gathering in France.Politicsread more
The latest round of tariff announcements in the last few days means that by the end of the year, essentially all Chinese goods exported to the U.S. will be subject to duties.China Economyread more
Futures fell after Trump said the U.S. will raise tariffs on more than $500 billion worth of Chinese imports, increasing trade tensions.Marketsread more
As Washington and Beijing continue to up the ante in their protracted trade fight, the potential of a recession in the U.S. is now "the biggest concern," according to Standard...US Economyread more
Tensions stemming from the U.S.-China trade war escalated sharply over the last few days, with much happening as Asian markets were shut down for the weekend.China Economyread more
Clouding the G-7 gathering, which represents the world's major industrial economies, are the tit-for-tat tariffs between Washington and Beijing.Politicsread more
Neither the U.S. nor China wants to be seen as the party that derailed trade talks, says William Reinsch of Center for Strategic and International Studies.World Economyread more
China said Friday it will be resuming 25% duties on U.S. autos, and a further 5% on auto parts and components.Asia Marketsread more
World leaders, environmental groups and celebrities have publicly decried the vast swaths of forest being destroyed by the fires.World Newsread more
Education Minister Ong Ye Kung says the Singapore government has been preparing for the challenge of an aging workforce "for the past 20 years."Employmentread more
Rising wages are expected to eat into corporate profit margins, weighing on companies that are already projecting much slower growth. But Goldman Sachs said some stocks should be immune to higher labor costs.
The January jobs report pointed to a 3.2 percent year-over-year increase in wage growth, around the highest levels in the economic recovery. Rising wages are beginning to force companies to pass on the costs through higher prices, threatening to slow corporate revenue growth even further. However, some companies have very low exposure to labor costs and they should beat the market as wages remain a margin headwind, according to Goldman.
"A tightening labor market and rising wages add to pressure on corporate profit margins," Ben Snider, an equity strategist at the bank, said in a note Tuesday. "Stocks with the lowest labor cost exposure should outperform as wages continue to rise."
Goldman put together a basket consisting of 50 of the S&P 500 companies with the lowest ratio of labor costs to revenue. Labor costs account for 6 percent of revenue on average for the basket's stocks, compared with 14 percent for the S&P 500 overall. The basket outperformed the S&P 500 by more than 20 percentage points from early 2016 through mid-2018 when wage growth stoked inflationary pressure, pushing break-even inflation to 2.2 percent from 1.2 percent, Goldman Sachs said.
Companies are now faced with a list of margin headwinds including rising wages, slowing revenue growth and tariffs after an easy 2018 when pro-business tax policies boosted corporate profits. Wall Street analysts are slashing earnings expectations for 2019 so sharply that estimate for the first-quarter earnings growth has turned negative, while consensus for net profit margins fell to 10.9 percent in 2019, down from a record high of 11.2 percent in 2018.
Goldman Sachs' basket has outperformed the S&P 500 by 3 percent year to date, and the bank expects it to continue to beat the market as U.S. economic growth stabilizes.
The low labor cost basket from Goldman for clients includes stocks such as Western Union, Mastercard, Paypal and Marathon Petroleum. The firm calculates labor costs are just 1 percent of revenue for Marathon, an oil refiner.