Good morning! I'm in Washington, D.C., today to check in with IMF managing director Kristalina Georgieva, who's speaking at the Peterson Institute for International Economics.
Was this email forwarded to you? Sign up here. (Today's Smart Brevity count: 1,131 words, 4.5 minutes.)
🎙 “The practical cost of change for the nation up to this point has been cheap. The limited reforms have been obtained at bargain rates. There are no expenses, and no taxes are required, for Negroes to share lunch counters, libraries, parks, hotels and other facilities with whites. ... The real cost lies ahead.”- See who said it and why it matters at the bottom.
Illustration: Aïda Amer/Axios
The Tax Cut and Jobs Act helped power the biggest U.S. banks to record profits for the second straight year.
Why it matters: The tax cut was sold as a way to revitalize hiring and spending by American companies to boost the economy and help struggling workers, but the windfall is largely staying with banks and their shareholders.
By the numbers: JPMorgan, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley announced earnings this week showing they saved $18 billion in 2019, and their average effective tax rate fell to 18% from 20%.
The big banks so far have reported stellar earnings from Q4, with the exception of Wells Fargo.
The intrigue: The big banks have actually shed jobs since passage of the tax cut law, collectively reducing their workforce by 1,200 people since 2017, Bloomberg reported.
Of note: Banks weren't supposed to deliver such strong earnings in 2019. Last year's earnings growth was measured against 2018 when the lower tax rate had already taken effect, unlike in 2018 when comparisons were to 2017 when tax rates were 35%.
Wall Street analysts are betting the banks can't do it three years in a row.
What they're saying: Analysis from Yardeni Research shows the average expectation is for a 0.4% decline in S&P 500 diversified banks’ 2020 revenue and only a 3.8% increase in earnings.
Citi will announce today plans to use 0.7% of the $19.4 billion it made in profits last year to create an impact investing fund, Axios has learned.
Details: The $150 million fund — 3% of Citi's Q4 profits — "is the largest fund of its kind to be launched by a bank using its own capital," the bank said in a statement provided first to Axios.
What it means: Double bottom line investments are those that focus on a company's fiscal profits and losses as well as its social impact.
Where it stands: Researchers have generally been dubious of such investments, with a recent study concluding that "donating effectively is usually better than Impact Investing."
President Trump plans to nominate two new Fed governors — former campaign adviser Judy Shelton and St. Louis Fed director of research Christopher Waller (AP)
China's fourth quarter GDP growth was 6.0% year over year, matching expectations and putting 2019 GDP at 6.1%.
New European trade commissioner Phil Hogan threatened to bring the U.S.-China trade deal to the WTO as a possible violation of global trading rules. (N.Y. Times)
The Treasury Department will begin selling 20-year bonds at some point during the first half of the year, rather than 50- or 100-year bonds. (Treasury)
Outstanding student loan balances have tripled since 2006 to more than $1.6 trillion, and annual repayment rates have been just 3%. Only 51% of borrowers who took out loans from 2010–12 have made any progress paying down their debt. (CNBC)
Bullish stock investors got just about everything they could ask for on Thursday, as the market rose to fresh all-time highs following the signing of the phase one U.S.-China trade deal Wednesday.
Quick take: Morgan Stanley became the latest U.S. bank to report earnings that trampled Wall Street expectations, rising 46% to $1.20 a share adjusted, with revenue up 27% to $10.86 billion. Its shares rose as much as 8% during trading.
What else: U.S. data were strong, as retail sales met expectations for the headline number and topped economists predictions for sales excluding autos and in the control group reading.
To top it off: The vote on the new NAFTA agreement, dubbed USMCA, passed the Senate by a 90-10 total, relieving lingering worries businesses may have had about its passage.
Commodity prices have sagged to start the year, even after the signing of the U.S.-China phase one trade deal, which should see billions more agriculture and manufacturing purchases by China in the next two years.
What's happening: The world is experiencing a deficit of sugar with a 1.9 million-ton shortage for the 2019–20 year, which follows a surplus of 2.55 million tons in 2018–19, Reuters reported in November.
On the cocoa front, buyers have raised their minimum price paid per metric ton from about $2,124 to $2,600 after Ghana and Cote d'Ivoire threatened to suspend sales of cocoa beans for next year's season.
Of course this quote comes from Dr. Martin Luther King, Jr.. It's from his book, "Where Do We Go From Here: Chaos or Community?"