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Congress Returns & China Dominates News

04.08.2018 | Ben Phillips, CFA

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Congress returns to Washington DC today after watching China tariffs dominate the headlines last week.

 

Congress Returns as China Dominates News

 

We’ve written previously about the potential for a trade war and how Trump’s position on China has been consistent.

 

With trade rhetoric heating up, shipping companies are exposed to increased volatility. Below are three shipping companies we’re watching:

 

  • Expeditors International: A logistics company that buys cargo space from ocean shipping and airline companies for resale to customers. ~27% of its 2017 revenue came from China.
  • Atlas Air Worldwide Holdings: A New York cargo airline that provides outsourced aircraft and aviation operating services. ~15% of its 2017 revenue came from China.
  • Matson Inc: A company that provides shipping services throughout the Pacific Ocean, primarily to and from the Hawaiian Islands. ~23% of its 2017 revenue came from China.

 

These companies are in addition to industries we identified last month. It may seem like trade is the only policy item to watch right now. Below are two policies outside of trade were currently watching.

 

DOWNLOAD THE POLICY TRACKER

 

 

Farm 

2018 Farm Bill

 

The farm bill is the primary agricultural and food policy tool of the federal government. Supplemental Nutrition Assistance Program (SNAP), commonly known as "food stamps", typically makes up ~80% of annual farm bill spending.

 

Congress is currently drafting the 2018 farm bill, a re-authorization of the 2014 farm bill. It’s the first time in decades Republicans control both Congress and the White House while a farm bill is negotiated. House Republicans see the bill as an opportunity to reign in federal spending on food stamps by pushing for work and strict eligibility requirements. House Democrats have pushed back, stalling negotiations.

 

Outside of Congress, the Trump administration is pushing to rein in food stamp spending by nearly $130 billion over the next decade. Grocers may be negatively impacted by food stamp reform.

 

Food retailers, such as Walmart, Target, Dollar Tree, and Kroger, could lose billions of dollars in sales.

 

Opioid

 

Opioid Crisis

 

The nation’s opioid crisis continues to grab headlines and Congress’s attention. Congress approved $6 billion in funding as part of last month’s spending package to pay for prevention, treatment and law enforcement efforts to fight the opioid epidemic.

 

Cleveland is the battleground for the opioid battle, where hundreds of lawsuits initiated by cities, counties, and unions have been brought together under one case. McKesson Corp, Cardinal Health Inc, and AmerisourceBergen Corp are the subjects of the complaint, as the plaintiffs allege the pharmaceutical distributors allowed opioids to flow into cities and states across the country.

 

In our view, pharmaceutical distributors not only face judicial headline risk, but also legislative risk as lawmakers consider increased regulation. Download our 2Q'18 Policy Tracker for more policy-focused investment opportunities.

 

 


 

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Important Information

Active Weighting Advisors LLC ("AWA") is an SEC-registered investment adviser that manages ETFs under the brand name EventShares Funds. Mr. Phillips is the Chief Investment Officer of AWA. The views expressed are subject to change, and no forecasts can be guaranteed. The comments may not be relied upon as recommendations, investment advice or an indication of trading intent. AWA is not soliciting any action based on this document. In preparing this document, the author has relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources. Investing involves risk, including the possible loss of principal and fluctuation of value. Mr. Phillips and AWA disclaim responsibility for updating information. In addition, Mr. Phillips and AWA disclaim responsibility for third-party content, including information accessed through hyperlinks. For more information about EventShares, contact us by calling 877.539.1510 or visit our website at www.EventShares.com.