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THE HEADLINES

QUANTITATIVE TEASING

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Ya’ll got any more of them rate cuts?

Despite the FOMC lowering interest rates by 1/4 of a percent to between 2% and 2.25%, just like most investors expected, markets tumbled. But more on that later.

In addition to its first rate cut in more than a decade, the Fed also announced a plan to halt the runoff of its $3.8T asset portfolio, which is another means of tightening monetary policy.

So what was the rationale for Jerry Interest Rates’ decision? According to the Fed chair: “the implications of global developments for the economic outlook as well as muted inflation pressures.” Translation: Trump, China, and tariffs. But mostly Trump.

Isn’t this what markets wanted?

Yes. But actually, no. Market participants would have preferred a 50 basis point rate cut, but that isn’t what has their panties in a bunch.

It was two(ish) simple words spoken by Jay Powell that caused the largest sell-off since May: “mid-cycle adjustment.” Jay indicated this is “not the beginning of a long series of rate cuts” which many had hoped for. Of course, in typical Fed fashion, he also didn’t rule out future cuts.

And what did President Trump, a noted Jay Powell hater, have to say? He wasn’t mad … he was disappointed. POTUS didn’t mince his words, indicating that “Powell let us down.

The Dow tumbled nearly 330 points on the news.

SEE NOTES

Sunglass powerhouse EssilorLuxottica is making a play for an even larger share of the market as it has agreed to a $6.1B deal to purchase GrandVision. The company agreed to pay 28 euros per share to buy out investment firm HAL’s 77% share in the vision service and retail provider. Once that deal is done, EL plans to buy out the remaining GrandVision shares and become the outright owner.

Essilor and Luxottica united in 2017, joining the world’s largest lens and contact manufacturer with the world’s largest frame manufacturer in a $49B deal. I love the smell of vertical integration in the AM. The result was a Franco-Italian company with a stranglehold on the eyewear market that would have made Napoleon and Mussolini proud.

As far as the eye can see

While the Ray-Ban maker has got the manufacturing process locked down, the merger of the two giants didn’t address one key component: retail distribution. The mega manufacturer does own a combination of 9k LensCrafters and Pearle Vision outlets but lacks a major brick and mortar presence in Europe.

That’s where GrandVision comes in. The company owns about 7k stores across 40 countries mostly in Europe.

The deal will allow both companies to leverage each other’s strengths should it pass antitrust review. The deal has twelve months to be finalized or else prices are subject to change … and feelings are subject to getting hurt.

UNDERPROMISE, OVERDELIVER

GE released its earnings report and investors were, wait for it, pleasantly surprised. The firm posted adjusted earnings per share of 17 cents, down 6% from the same quarter last year, but above the 12% expected by analysts. The company also reported revenue of $28.83B, again down from last year, but higher than the analyst predicted $28.68B. Have you no faith, analysts?

It wasn’t just reported earnings that beat expectations. GE also raised its forecasted earnings for this year to a range of 55 to 65 cents per share, up 5 cents on either end from its original forecast. On the news, GE stock opened up more than 2% … before falling to close 0.7% down by the end of the day. Because, after all, it’s still GE in 2019.

I’ll see myself out …

While beating expectations has its perks, not growing earnings year over year has its downsides. In this case, the downside is the departure of your CFO. On Wednesday, GE announced that Jamie Miller, CFO since 2017, would be leaving the company. She’ll stay on during the leadership transition, but after that, she’s off to the Big Multinational Conglomerate in the sky.

Miller has been with GE for more than 11 years and took over the role of CFO succeeding Jeffrey Bornstein who left after John Flannery became CEO. Late last year, Flannery was also sent packing and Larry Culp took the reins, sparking the “turnaround” (read: life support) effort we see today.

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