It’s taken a long time, but stock investor sentiment on almost the entire gaming industry now appears sanguine.
First, the Las Vegas rebound found adherents.
More recently, regional casino operators have imbued investors with confidence.
Now, there is a nascent and tentative move to see light at the end of Macau’s tunnel.
Analyst Kai Tan of Macquarie has even raised the Macau market as a whole to neutral and raised his target prices on all six casino concession holders.
On specific companies, Tan upgraded Sands China to outperform and Melco Crown to neutral.
He forecasts citywide gaming revenues to fall just 2 percent this year, be flat next year then finally rise again in 2018, though at a snail’s pace of 3 percent rather than the 40 percent rocket rides in the halcyon days of not so long ago.
Next up for a sentiment turnaround are suppliers, and that might not be too long in coming.
The industry’s two biggest players, IGT and Scientific Games, recently announced stronger than expected financial results, debt coming down, and those now-prosperous U.S. casinos appear to finally have started planning to freshen their floors with new slot machines.
Other companies, such as Aristocrat and Ainsworth, had already shown the way to sunnier times, but IGT and Sci Games are the giants that can set the tone for Wall Street.
The overall U.S. economy is providing a lift as well with consumers clearly more confident, even though there are signs that the strong dollar might be clipping the wings of export-oriented employers.
Not everyone is a bull yet, but it’s starting to feel that way. And that’s a sign to be wary.
One threat some see to the stock market is the prospect of Donald Trump becoming President Trump.
An outfit named the Economic Intelligence Unit in London is stirring up the fuss saying Trump as president would be as dangerous a threat to the world economy as is international terrorism, and that he would be even worse for the U.S.
We doubt it.
Trump might be outrageous, rude and crude, but there are two things he isn’t—stupid or reckless.
The U.S. stock market has withstood many presidents and, we suspect, it would survive Donald Trump though there could be a post-election, pre-inaugural swoon.
If the market does sell off after a Trump election, it might be a buying opportunity, all else being equal.
BUT THE FED
On the other hand, the central banks of the world are getting downright weird with things like negative interest rates.
There was a time when it was said that the role of the Federal Reserve Board was to remove the punch bowl before the party got out of control.
Now, it seems, the Fed sees its job as spiking the punch, instead; and if it appears the party is winding down, spike it some more.
Eventually, however, even 100 percent alcohol can’t keep a party going.
A case can be, and by many is, made that central banks have been too accommodative, creating asset bubbles with unsustainable policies.
And what weapons do the banks use after they used them all?
So there you are, some reasons to worry at a time when being sanguine appears to be the order of the day.