Tag Archives: Should
Ahead of the Super Bowl in 2017, Domino’s Pizza took a step into the future by enlisting their first chatbot as a PR tool. Their decision to take advantage of their active Messenger users, with a focus on the experience over the ROI, was a smart and innovative move – and exactly what we are going to talk about today.
Money Makes the Product Launch
As much as I hate to be the one to tell you this, it costs to play today. Product launching is not a fast return on investment, at least not in the way most launchers think, and there is going to be an investment first, no matter what. But there are things you can do to make the most of those dollars, especially when it comes to teaming up your marketing with the latest technology. While I was in Hong Kong giving a speech, marketing veteran Michelle Barnum Smith blew me away with her knowledge and expertise. I knew she would be the perfect person to bring you everything you need to know about leveraging chatbots as a marketing tool, and the power in Facebook messenger. My disclaimer: I’m not a huge Facebook fan and I really don’t love Messenger, but the stats are undeniable.
Getting Intimate with Chatbots
Bots are really just a computer program that can automate certain tasks for a business, in a conversational manner, allowing businesses to reach customers more plus faster than ever before, with low cost impact and without removing the “human” element. It’s basically automated marketing, that isn’t a boring or bothersome email, and meets the consumer right where they already are. The bottom line is this: Any business can use Facebook Messenger, especially for eCommerce whether you’re selling direct or you’re selling through Amazon. It’s a massive opportunity to be able to use Messenger marketing for your business.
Read This Twice: Don’t Put Your Audience Last
“For so many sellers, building a list or having a launch audience becomes something that they think of down the road instead of being part of the core.” Marketing changes constantly; it’s always new, adapting, and growing and product launchers need to be thinking about that as part of their launch strategy, not something that comes after. One of the things we do at Product Launch Hazzards is focus on a strategy that builds the audience first:
For example, if I want to make and build this innovative, cool juicer blender, I would go find a juicer and a blender that already exists and sell that first.
I would build that audience while developing on my end, so my product development process is being supported, and I’m getting real time feedback on what works and what doesn’t.
I would consistently work to build conversations and connections with that community, because those are my “right people” and I would leverage that with future product launches.
Once I have this audience, just like an email list that I have access to, I can also use that platform to bring value and educate. Not just to constantly sell, but to offer juice recipes, eBooks, blog posts, podcasts, and anything else that is relevant to my community of juicers.
What’s Different About Facebook?
First, let’s talk numbers, because there is a really significant shift here. For your traditional email list, you could never have success with a list that sits around two thousand. In fact, due to the twenty percent open rate, you would need ten times that minimum at the very least. On Facebook, right now, there is a ninety percent average open rate.
Employing Great Marketing Practices
Barnum Smith pointed out her frustrations with email marketing and also pointed out what Facebook is doing to prevent the same tactics from funneling onto their platform. “I subscribed to Bath & Body Works because I like their deals, but I cannot handle how many emails they send me. They send five emails a day. They have to do that because I might only open one every ten days. Facebook’s trying to prevent that level of spamming on their platform. They want to make sure that it’s protected as an engagement platform, so users don’t disengage from their Messenger.”
One Billion Strong
Facebook has over a billion users just on Messenger. And with Messenger, because it has way more of a social and engagement focus, most people still have their notifications open and they want to know when they get a message.
There’s an average read time of three seconds.
Messenger is the biggest chat platform, aside from WeChat in China.
“The reality is that with your content on social media platforms like Facebook, the algorithm will only feed your story to their newsfeed two to five percent of the time organically. If you boost a post, it goes up to fifteen to twenty percent. If you get somebody as a Messenger subscriber, they will see your content one hundred percent of the time.”
Avoid These Chatbot Mistakes
A lot of Barnum Smith’s expertise comes in handy for clients when she is helping them understand what not to do. You don’t want to be banned from Messenger because you didn’t know the rules to play by, so let’s do a quick overview.
Do not spam. I mentioned this above, but as a reminder: if it feels more like harassment and less conversational, you’re doing it wrong. Be intentional and aware of each point of contact.
Focus on value. Chatbots are a tool you can leverage to add value to the lives of your followers and lists. Keep that at the center of everything you are doing. Marketing can get into some gray territories if you aren’t focused on adding value and transparency.
Avoid lengthy stories. That’s what email is for. Messenger is the quick and dirty, the nitty gritty – “We’ve got a new post up, check it out”.
Let them go easy. Permission marketing is a concept I really like. Make it easy for people to opt out of your notifications and sharing. If they don’t want to be there, you don’t want them there anyway. Make it easy for people to unsubscribe so they don’t block or delete your conversations because then Facebook will flag those. You get too many of those and you get banned.
Chatbots are going to be a massive piece of the marketing puzzle in the near future. Launchers tend to steer clear of Facebook Ads and Messenger, and if this is you- you’re leaving a lot on the table. If you can’t seem to make the leap, go to an expert like Barnum Smith and take advantage of the hands-on help. No matter which way you get there, you need to get there. With a ninety percent click through and open rate, you can’t afford to not have a Chatbot working for you.
Fundraising has always been, and will remain one of the most challenging elements of building a startup for a first time entrepreneur. We have already covered how to answer some of the most common investor questions.
Communicating effectively throughout the process with an investor is also imperative to your success, even when communicating digitally. There are also many things entrepreneurs should never say to anyone, but there are certain phrases that people say to investors all the time, that upon those words being uttered, the meeting is instantly over, even if it officially continues for an hour.
Here are three things entrepreneurs should never, under any circumstances, say to an investor:
“Can you sign an NDA?”
How does anyone, in their right mind, think it is ok to ask an investor, or for that matter, anyone they are going to for advice or assistance, to sign an NDA? I can tell you as someone who meets and helps entrepreneurs a few times a day, that if someone asks me to sign an NDA, all I hear is “Listen, I want your help, but really, I don’t trust you enough to tell you what I am building so please waste your time helping me, even though I am not paying you, and even though I think you are a dishonest person who is going to steal my idea or give it to my competitor.”
In other words, asking me, or an investor to sign an NDA, is not only ineffective, it is highly offensive, not to mention, a waste of your time, but more on that later.
“I have no competitors.”
Any entrepreneur who says they have no competitors says it because they think it will make a positive impression that the whole market is sitting and waiting for their solution while everyone else missed the opportunity. The reality? Quite the opposite.
If you tell an investor that you have no competitors, you are either not prepared for the meeting and didn’t do competitive analysis or you don’t understand the meaning of a competitor. Alternatively, if you say you have no competitors, you might actually be lying to the investor and even worse, to yourself.
No matter which one of those reasons is true, saying you have no competitors is about the dumbest thing you can say to an investor and makes the worst possible impression.
Why? If you have competitors, if you have many competitors, other companies trying to solve the same problem as you, that means one thing. There is a real problem that people want a solution to, which means there is a huge opportunity. Others are trying to solve it? So what? Many are trying to cure cancer. The problem still exists and whoever solves it will get a Nobel prize.
“No one can steal my tech because I have patents.”
Oh man, when I hear these words mentioned by an entrepreneur, I genuinely do not know whether to laugh or cry. This is similar to the NDA question in that, even if you have patents or an NDA, neither of them will really protect you in the wild jungle that is startup life.
Think about it. Imagine you have a signed NDA or a patent for your technology, and a huge multi national corporation who you showed it to, steals it. Now what? You are going to spend the next 5 years of your life and the 30 cents you have in the bank to litigate and sue this company? Really? That is what you think is the most effective use of your time and money? News flash: It isn’t.
I know that patent attorneys might take offense to this, but in 2019, your defense or your barrier is not a patent or an NDA, it is execution. You don’t have to be the first to do it, and if others try to do what you’re doing, you need to beat them not on timing, but on building the best version of your vision.
Apple wasn’t first. In fact, Apple was told they don’t stand a chance because Nokia and Blackberry own the market. Facebook wasn’t first or last and Zuck was told he has no chance because MySpace has market dominance. And the list goes on.
Don’t be first and try to prevent others from entering the market. Instead, focus your time and resources on executing in a way that no one else can copy. That beats your patents and NDAs any day of the week.
Grüezi from the snow-coated Swiss Alps, in whose fir-studded, canvas blanc landscape the World Economic Forum recently transpired.
An inescapable theme at this year’s summit was data privacy. The topic happens, ironically, to play counterpoint to another central theme—that datavore dubbed “artificial intelligence,” as Adam Lashinsky, this newsletter’s regular, weekday author, noted in an earlier column (and elsewhere).
The two concepts are inversely related, a Yin and Yang. Businesses are looking to fill their bellies with as much information as possible, extracting insights that might give them an edge over the competition. Indeed, data-guzzling machine learning processes promise to amplify businesses’ ability to predict, personalize, and produce. But in the wake of a seemingly endless string of data abuses and breaches, another set of stakeholders has grown increasingly vocal about implementing some, let’s call them “dietary restrictions.” Our appetites need limits, they say; left unchecked, the fast-and-loose practices feeding today’s algorithmic models threaten to undermine the autonomy of consumers and citizens everywhere.
The subject of data stewardship clearly occupied the minds of the most powerful politicians in attendance. In the main hall of the forum, two heads of state shared their concerns on Wednesday. Japanese Prime Minister Shinzo Abe said the topic will be one of two primary agenda items for the G20 Summit he is hosting in Osaka in June. (The other is climate change.) Later, German Chancellor Angela Merkel urged Europe to find an approach to data governance distinct from the U.S.’s style, where corporations dominate, as well as the Chinese one, where the state seeks total control.
While policy-makers leaned, unsurprisingly, toward lawmaking, some members of the business set countered their notions with alternative views. Jack Ma, Alibaba’s founder, cautioned against regulation, arguing that it restricts innovation. During a panel on digital trust I moderated on Thursday, Rod Beckstrom, the former CEO of ICANN, an Internet governance group, argued that Europe went astray when it adopted the General Data Protection Regulation, or GDPR, last year, and he advised against the U.S. pursuing a similar path. Instead, Beckstrom proposed adding a privacy-specific amendment to the U.S. Constitution, one separate from the Fourth Amendment’s guard against warrantless searches and seizures. A provocative, if quixotic, idea.
By all measures, the disruptive, data-centric forces of the so-called fourth industrial revolution appear to be outpacing the world’s ability to control them. As I departed Davos, a conference-sponsored shuttle in which I was seated careened into a taxi cab, smashing up both vehicles. (No major injuries were sustained, so far as I could tell; though two passengers visited the hospital out of an abundance of caution.) While waiting in the cold for police to arrive and draw up a report, I was struck by how perfectly the incident encapsulated the conversations I had been observing all week.
We are all strapped, inextricably, to a mass of machinery, hurtling toward collision. Now what must be done is to minimize the damage.
Why would somebody who had achieved so much risk everything by flaunting the rules?
Unfortunately, Ghosn is just the latest case of poor decision-making in the C-suite that has gone unchecked. Another recent example is Elon Musk, an incredible visionary who consolidated power as chairman and CEO of Tesla, then was forced to give up his chairman role after making inappropriate social media posts about taking the company private.
There is a lesson here: Passion and vision are vital to success in business, but they are not everything. There is a reason that barely half of all companies in the S&P 500 Index combine the roles of chair and CEO in one person. Absolute power corrupts.
That’s why, rather than insulating themselves from balancing influences, smart leaders build support systems that minimize their weaknesses and help them avoid falling prey to corrupting influences.
If you aspire to be a top leader in your field, here’s how you can follow that path of success.
Build a team of rivals.
One of the biggest mistakes powerful people can make is to surround themselves with colleagues who create an echo chamber, rather than with people who question ideas and push them to improve. Steve Jobs wanted to be challenged by Apple’s best and brightest; he said that when team members debate, “they polish each other, and they polish the ideas.“
Jobs believed that team members needed to get comfortable with conflict to drive each other to do better. And, he was right. Building a culture of productive conflict keeps leaders sharp. The best team will take your strong ideas further and rein you in when you are headed in the wrong direction. If you build a team of enablers who support your every move, you will begin to think you are infallible. In mild cases, that mindset can inhibit growth; in cases like Ghosn’s, it can derail careers and tarnish legacies.
Think candidly about the people around you. Do they feel empowered to challenge you and polish your ideas? Have you done enough to promote productive conflict on your leadership team? The answer to those questions will determine the health of your organization.
Hire people who complement your weaknesses.
The best leaders are self-aware enough to know their own weaknesses and to gravitate toward people who minimize those shortcomings. Former Disney CEO Michael Eisner and President Frank Wells built a brilliant partnership because they complemented each other perfectly: Eisner was the visionary strategist, and Wells was the practical executor. Together they transformed the entertainment industry.
People are often drawn to those who are similar to them, but it is vital to widen your perspective. Colleagues with different backgrounds and skill sets can remind you of consequences you have not considered and provide viewpoints or ideas that might tip the scales in taking your business from good to great.
Establish clear governance.
Though it is less visible, a company’s governance can be just as important as its culture and vision. Make sure to have a strong legal team and consult with auditors to keep your business compliant with the highest standards. You should be following best practices long before anyone starts watching.
It can be easy to lose sight of governance, especially when pursuing exponential growth. Leaders have a responsibility to set the example. If employees see their supervisors treating governance as a low priority, they will be more prone to misconduct. What you permit is what you promote.
Remember that the consequences for ignoring governance can affect companies on a grand scale. Already, Ghosn’s behavior at Nissan has created tension in the valuable partnership between Nissan and Renault, an issue that could ultimately damage both companies.
One of the challenges of success is that each accomplishment brings new problems to solve. It is all too common for highly successful people to think that they are infallible, that they are the smartest person in every room, and that the rules do not apply to them. Leaders owe it to themselves and their organizations to erect structures to guard against these pitfalls.
Do not fall prey to the corrupting influence of power. Surround yourself with people who challenge you to improve; hire employees who minimize your weaknesses; and remember the principles that govern your organization and keep your business honest. No matter what leaders achieve, they must continue to set an example for others to follow.
Every year, my inbox fills up with holiday gift guides, predicted buying trends, and everyone’s list of the “best of the best” stocking stuffers. I even follow suit at times, and create my own gift guides to help consumers navigate the ever-changing tech options… But this year, if there was an award for holiday gift guides, Digital Trends would be winning big, because their genius holiday campaign has everything and then some.
Expertly Targeted Content
The guide Digital Trends put out depicts products featured and told as stories in miniature scenes, thanks to a partnership with animation studio HouseSpecial. The stories and scenes offer gift ideas for the tech savvy, but in several different categories, like audiophile and foodie. Each scene holds tremendous attention to detail, and draws in the attention of the viewer for several different reasons. Not only are the scenes visually appealing, they are perfectly targeted, and feature products without the products being the actual focus of the scene.
MediaPost pointed out that the figures for the guide were designed in H0 scale. This is the traditional scale for model railroads (Hello Christmas trains and villages!), and this time of year, that is a genius touch, that proves 1) size matters, and 2) attention to detail on every level feels luxurious because we rarely see or experience that in advertising.
What + How + Where
It’s not only WHAT they are saying about the product(s) but HOW they are saying it that has determined the efficacy of their guide. This guide is intentional. It’s clear that the creators went in with a strategy, with intentions, and with clearly defined tangibles as outcomes. This is important because it’s so much easier to get it right when you have the what, how, who, and where answered before you begin.
This Guide Is So “Instagram-able”
This unique “Instagram-able” product advertising campaign is unique and perfectly targeted in the following ways:
It’s visually impactful and easily shared. The scenes are done so well, they have feelings to them of nostalgia and something unique, and they are easily shareable, which allows consumers to easily create buzz for them.
They are tapping into the nod to collectable holiday villages and model railroads, hitting right to the type of consumers they want to attract.
They feature products without being product shots and really separate out and make products that are me-too, and available anywhere, special enough to be clicked and bought to reward the creativity. Point blank: the guide makes people want to buy items they may have scrolled past on Amazon more than once, because of the emotion and connection they feel to the scenes and campaign.
With more than 30 million unique monthly visitors, I’m happy to take notes from Digital Trends. Alana Wolfman, their director of production, who shared their strategy of using SEO search queries to stay in front of exactly what users are searching for during the holiday season. In addition to that, the scenes themselves were created by a team that has worked on campaigns for major players like Chipotle, Planters, noosa, and Dish Network.
Rising Above the Noise
The reason I really love this campaign, other than the adorable perfectly executed miniature displays, besides the fact that it is everything an advertising campaign should be in its ability to be shared and to capture attention, aside from it’s near perfect timing and magnificent attention to detail… is how the creators went outside of the box, to create something unique. That might not sound like much, but to be unique with intention, in a place where everyone is trying everything to be relevant, is a big deal.
The thought put into creation speaks for itself, and should push your goals for future product advertising. Don’t be afraid to be unique, to go big (or small!), and to pay so much attention to the details that your attention feels like luxury to the consumers experiencing your campaign.
And the advice rings true. When we focus too much on others, we can lose sight of ourselves and our own progress. Now researchers are figuring out why.
A team led by Steven Buzinksi at the University of North Carolina at Chapel Hill has investigated how the judgments and decisions of students can be guided by their perceptions of how others like them behave. This idea was explored previously — another study, concerned with how students overestimate how much their peers drink alcohol, found that this “widespread overestimation” actually influences students to drink more themselves.
However, this Chapel Hill team wanted to see if study habits and behaviors were affected in similar ways by inaccurate perceptions.
In studying hundreds of social psychology undergraduates, researchers found that exam scores could actually take a hit when students miscalculated how much their peers studied.
Overall, students had a tendency to underestimate how much time peers spent studying for upcoming exams. Even further, how much a student studied correlated with what they perceived was a normal amount of time to study, according to what they perceived about everyone else.
However, Buzinski and his team found that students’ misconceptions about the study time of their peers were not always positive influences for actual exam performance. One would normally assume that underestimating typical study time would lead to choosing to study less, and receiving poor test grades.
But, in fact, researchers surprisingly found that those students who overestimated, not underestimated, their peers’ study time actually performed worse in the subsequent test.
The reason? Buzinski’s team speculate that anxiety and self-doubt arrived when a student felt as if his or her peers were hitting the books too hard (even though it is likely that this perception was inaccurate).
Future research will be needed “to confirm the robustness of these findings,” and it may be necessary to “directly observe how correcting misconceptions affects students’ study behavior and their confidence.”
Ultimately, it may benefit you to apply these findings to your own working life — to think about how hard others may be working may actually cause you stress and anxiety, damaging your performance. Plus, you may be wrong about how hard your peers are working — so yes, make sure to focus on you.
Facebook CEO Mark Zuckerberg said this week the company will create an oversight board to help with content moderation. The move is a belated acknowledgement Zuckerberg is out of its depth when it comes to ethics and policy, and comes six months after he first floated the idea of “a Supreme Court … made up of independent folks who don’t work for Facebook.”
The idea is a good one. If carried out properly, a “Supreme Court” could help Facebook begin fixing the toxic stew of propaganda, racism, and hate that is poisoning so much of our political and cultural discourse.
But how would a Facebook Supreme Court actually work? Zuckerberg has offered few details beyond saying it will function something like an appeals court, and may publish some of its decisions. Meanwhile, legal scholars in the New York Times have suggested it must be be open, independent and representative of society.
As for who should sit on it, it’s easy to imagine a few essential attributes for the job: The right person should be tech savvy, familiar with law and policy, and sensitive to diversity. Based on those attributes, here are five people that Facebook should select if it is serious about creating an independent Supreme Court.
A Turkish sociologist and computer programmer, Tufekci was one of the first to raise the alarm about the moral and political dangers of social media platforms. She is a public intellectual of the internet age, using forums like the New York Times and Harvard’s Berkman Center to denounce Silicon Valley’s failure to be accountable for the discord it’s fostered. Tufecki has also taken aim at Facebook’s repeated use of “the community“—a term that is meaningless to describe 2 billion users—to defend its policies.
An iconoclast who has built several public companies, Thiel is also a lawyer who started the venture capital firm Founders Fund. A gay conservative and a supporter of Donald Trump, Thiel is deeply unpopular with Silicon Valley’s liberal elites—which is why his appointment would ensure ideological diversity on Facebook’s Supreme Court. Thiel is an early investor in Facebook and a longtime board member, which gives him a deep knowledge of the company. He would have to give up these positions to preserve the body’s independence.
Judge Lucy Koh
Koh has presided over numerous high-profile technology trials and is highly regarded in Silicon Valley. Her work as a federal judge includes the long-running patent trial between Apple and Samsung, as well as a case involving an antitrust conspiracy between Google, Adobe, and other firms. Her work on the bench and inspiring personal biography made her the subject of a flattering 2015 Bloomberg profile. Koh’s familiarity with the political and legal strategies of tech giants would provide invaluable expertise for Facebook’s Supreme Court (provided federal ethics rules permitted her to do so).
Tim Berners Lee
Sir Berners Lee is a computer science professor at Oxford University and MIT, who is best known as the inventor of the World Wide Web. Highly regarded in tech circles for his humility and vast knowledge, Berners Lee in recent years has become a vocal critic of the advertiser-based business models of the Silicon Valley tech giants. Appointing him to Facebook’s Supreme Court would show the company is serious about fixing its systemic problems with privacy.
Bozoma Saint John
Saint John, who was raised in Ghana, became a familiar name in tech circles when she became Apple’s head of music marketing after the company acquired her former employer Beats. She also worked at Uber before moving to the talent agency Endeavour. Saint John’s outspoken views on Silicon Valley’s white male culture would help inform Facebook’s Supreme Court in tackling hard issues of diversity.
FILE PHOTO: German Finance Minister and vice-chancellor Olaf Scholz attends the weekly cabinet meeting in Berlin, Germany August 1, 2018. REUTERS/Joachim Herrmann//File Photo
BRUSSELS (Reuters) – Germany’s Finance Minister Olaf Scholz said on Tuesday the European Commission should revise its plan for a EU-wide tax on large digital companies and stressed the new levy should be applied only if there is no global deal by the summer of 2020.
Speaking to EU finance ministers at a streamed meeting in Brussels, Scholz also said that a revised proposal should reduce the scope of the tax and exclude the sale of data and the internet of things – sectors that if included could result in the taxation of German carmakers.
Reporting by Francesco Guarascio; Editing by Matthew Mpoke Bigg
The cloud has come to the health care sector, and it’s having an impact by saving some money. However, that’s not the real value of cloud computing for this sector, a sector that affects us personally at some point in our lives.
Black Book Research found that 93 percent of hospital CIOs are actively acquiring the staff to configure, manage, and support a HIPAA-compliant cloud infrastructure. Also, 91 percent of CIOs in the Black Book survey report that cloud computing provides more agility and better patient care with the proliferation of health care data.
But there is a huge innovation gap when it comes to health care and cloud computing between what’s possible versus what is actually being done. Take patient data, for example. Most health care organizations, providers, and payers don’t make many moves toward better and more proactive management of patient data unless regulations move them along.
This isn’t about operational and billing data, or electronic health records (EHRs). If health care systems abstracted information in certain ways, both the doctor and patient would have better insights into the patients’ health, preventive care, and treatment.
The cloud services that support these innovative functions are now dirt-cheap. As hospitals become cloud-enabled, it’s time to start moving faster toward the complete automation of care, treatments, and analyses of patient health. Let’s move from a system that’s largely reactive to a system that’s completely proactive.
Of course, there are islands of innovation in the health care sector. But it’s still mostly on the R&D side of things and has yet to trickle down to direct patient care. The potential here is greater than in any other sector I’ve seen. Just consider the telemetry information gathered from smart watches and cellphones and the ability to funnel all data though deep learning-enabled systems that cost pennies an hour to run on the cloud.
Now that we have the tools, there is little excuse not to innovate beyond what’s been done already. We’re better than this.
On the latest edition of Market Week in Review, Senior Quantitative Investment Strategy Analyst Kara Ng and Sam Templeton, manager, global communications, discuss why we should pay attention to the US yield curve, President Trump’s tariff talk, and the latest corporate earnings reports.
US yield curve getting close to inverting
The slope of the US yield curve has fallen to just 24 basis points and getting close to inverting. Ng says “we should pay attention because an inverted yield curve is historically one of the best predictors of a downturn.” She notes over the last 5 economic cycles, an initial inversion preceded an economic recession between 9 and 18 months, while equity markets tend to peak about 6 months before a recession. This means there’s a large negative impact in being defensive in your portfolio too late, but also a cost in being defensive too early, and missing out on the late-cycle gains. Ng says savvy and timely investment strategy is everything. And while the slope of the yield isn’t inverted yet, it has uncomfortably flattened. She is currently expecting a recession in late-2019 or 2020, so believes it’s still too early to go completely defensive.
Should the Federal Reserve be more concerned about the yield curve?
Federal Reserve Chair Jerome Powell testified before the Senate Banking Committee in Washington this week and didn’t express a lot of concern about the flattening yield curve. Ng says Powell was upbeat about the economy and affirmed that gradual rate hikes are appropriate; for now it’s the neutral rate he’s more focused on than the shape of the yield curve. The neutral rate isn’t something you can observe, but is the theoretical rate where interest rates neither hurt nor help the economy. Ng is concerned that the Fed hasn’t paid enough attention to the slope of the yield curve historically and has argued “this time is different” too often. She explained it contains lots of information. For example, when the 10-year rate falls lower than the current short-term rate, it may be that the market expects lower short-term rates in the future, possibly because of a future growth slowdown resulting in the Fed cutting rates to stimulate the economy. Meanwhile, she says the shorter end of the curve is heavily influenced by the current Fed policy. If the Fed raises interest rates too far above sustainable fundamentals, then the restrictive monetary policy might start a recession. Ng says not to ignore the yield curve.
Trump threatens more tariffs on China
Ng says a month ago it looked like a US trade war with China was a risk, but not our central scenario. Now, she says the odds of a full-blown trade war are closer to 50/50. Ng says the tariff announcements are probably a “maximum pressure” negotiation strategy, because the US wouldn’t benefit from closed trade. She notes a lot of the tariff goods are intermediate, not final goods. That means that those goods are an input to some final product that could be made in the US. In the short run, US companies would have trouble finding substitutes for those intermediate parts, which would hurt US businesses. Ng says to keep an eye on how consumer and CEO confidence develops given potential disruptions to global supply chains.
It’s still early days in the reporting season, but so far Ng says the Q2 earnings season is surprisingly strong. Only 17% of US companies have reported so far, so Ng isn’t extrapolating too much from the small sample size, but of those companies, about 95% have beat expectations. She says that’s high, especially since earnings expectations were optimistic to begin with. However, market response has been relatively muted. Ng expects the Q2 earnings season will be strong, but not as strong as the Q1 season. Some of the macro tailwinds that previously helped Q1 earnings are fading – global growth is moderating and the US dollar strengthened, which impacts US multinational companies’ earnings.
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