Covington Investment Advisors, Inc. Blog

It’s official, Nick is out of the living room! Construction is over at Covington!

If you have visited our office in the past year you may have noticed a few out of the ordinary things; our Research Analyst, Nick Allen, working in the living room, loud noises, ladders, construction workers, etc. Well, this was all a part of our expansion, adding more office space upstairs to keep up with the growing needs of our company. I am happy to announce the addition at Covington has now been completed. I would like to take you on a virtual tour of our new office space, starting with the outside of the building.

New view from the front of the building..

Tariffs have been at the forefront of economic headlines over the past year. If the market headlines do not include “United States Threatens to Impose New Tariffs” then it most likely includes “Markets rise on the hope of a Trade Deal”. This has been the never ending cycle for the last year. On May 10^th, 2019 the Trump Administration announced that a 25% tariff would be placed on an additional $250 Billion worth of Chinese goods being imported to the US. This tariff levying once again shocked markets and sent them trading lower the following week. Although we follow these developments daily it is important to understand the impact that this political risk has on your investments.

Measuring The Effects Of The Trade War

Trade tensions, specifically tariffs, affect the economy and market in a number of different ways. Certain aspects of a ‘Trade War’ are relatively easy to quantify but most are difficult to predict exactly what the long term affects will be. One of the dynamics of tariffs that is relatively easy to quantify is the effect they have on corporate profit margins. According to Empirical Research Partners, the tariffs administered in 2018 decreased S&P profit margins by 2%. This number can be increased now that the amount of goods being penalized has increased. Profit margins are one of the most important factors affecting stock prices so any negative affects to profit margins will translate over to stock prices. Tariffs also affect GDP. The graph below provided by TD Bank illustrates the incremental effects that increasing the amount of goods subject to tariffs has on GDP. Although Q1 2019 GDP of 3.2% was strong, part of this could be contributed to rising inventories. One reason companies may be increasing inventories is to brace for an increase in the cost of imported goods...

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_{Covington Investment Advisors is continuing to expand in order to best serve the needs of our clients. Our office expansion efforts are underway and are nearing completion in the next few months. The expansion will provide us with more office space upstairs. You can see some pictures of the progress below. With our expanding space and client base, you may see some new faces at Covington soon. We would like to now introduce our newest hire, Nick Allen, an upcoming graduate of Indiana University of Pennsylvania. Nick will be joining us as a Research Analyst and has been interning at Covington since May.}