Stock Market Being Reshaped by Rise in Private Markets
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With your Money Briefing, I'm Charlie Turner at The Wall Street Journal in New York. In a moment, we'll talk about why the public stock market is being transformed by the rise in private markets.
There's less of a sort of constraint that companies need to say something to the public every quarter and that their share prices are kind of held hostage to that. And I think that's something that a lot of companies are increasingly looking at with a bit of fondness.
Ben Eisen of The Wall Street Journal will join us in a moment. First, here are some money and market stories you need to know. Sources tell The Wall Street Journal that President Trump, speaking at a fundraising event on Friday, said he was unhappy with the Federal Reserve's recent moves to raise interest rates. According to people in attendance, Mr. Trump voiced concerns that recent interest rate hikes under Fed Chair Jerome Powell would cool off an economy that has been growing at a rapid clip. This comes ahead of Mr. Powell's speech this Friday at the Fed's annual symposium in Jackson Hole, Wyoming. Abbott Laboratories is that rare growth story in the health care sector. Wall Street Journal heard on the street columnist Charlie Grant says Abbott is growing its top line faster than just about any health care company of comparable size.
And since it doesn't sell pharmaceuticals in the U.S., Abbott is relatively well insulated from regulatory risk. Abbott's four main operating segments, nutrition, medical devices, prescription drugs in emerging markets, and medical diagnostics, are all expanding at faster rates than the typical large cap stock. On an adjusted basis, total sales grew by 8 percent in the second quarter from a year ago.
What is changing about the public stock market because of private markets?
An example of Abbott's strong sales growth is its freestyle Libra glucose monitor, which eliminates the need for diabetic patients to prick their fingers. Second quarter sales of the monitor approached $500 million worldwide. Shares of big tech companies have soared this year, leading some to worry about overvaluations. But The Wall Street Journal's Mike Worsthorn says some observers, including fund managers, think concerns about multiples are short-sighted. While shares of companies including Amazon.com, Netflix and Salesforce.com have surged this year to price-earnings ratios that are several times the market's long-time average, many fans of these investments contend that such metrics can overstate risks.
They say they prefer a broader assessment of financial and strategic progress, arguing that this view can be more relevant for longer term investors. For more details, head to WSJ.com.
The public stock market, as we've known it, is being reshaped by the private market, and it's happening on a number of fronts. For one thing, the number of companies that are publicly listed has fallen over the years, with companies taking themselves private or opting not to list in the first place. Let's talk about the changes with Wall Street Journal markets reporter Ben Eisen, who joins us in our studio. Ben, your article, The Stock Market is Taking Cues from the Private Market, can be found in the MoneyBeats section of the journal. Isn't the main point here that A privately held company is not under as many constraints as a publicly traded company.
Right, absolutely. Privately held companies don't necessarily have to publicly report earnings every quarter. They still report to their shareholders, but there's less of a sort of constraint that companies need to say something to the public every quarter and that their share prices are kind of held hostage to that. And I think that's something that a lot of companies are increasingly looking at with a bit of fondness.
On Friday, President Trump said he instructed the SEC to study whether companies should release earnings twice a year rather than four times. And according to your article, he tweeted that business leaders told him it would allow greater flexibility and save money.
Yeah, absolutely. President Trump sort of suggested that this would be something that would benefit companies, and a lot of people do agree.
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