The automobile sector has been hit hard over the past year.
Several big scandals have proven to be detrimental while sales for automobiles have plunged lower and lower over the past few months. Investors in automobile manufacturers may want to take notice and consider jumping out of these sectors before these stocks hit rock bottom.
One of the biggest problems plaguing the automobile sector is the American consumer. While auto sales have remained steady within the U.S., American consumers have not been able to remain loyal to their contracts.
The $1 trillion auto loan market has been hit hard due to soaring loan delinquencies. According to recent reports, the number of people failing to make payments over a span of 60 days increased by 17% during the previous month. The CEO of JPMorgan Chase (JPM, Financial), Jamie Dimon, has admitted that the company is concerned about the current state of the auto market and auto lending in general. He insists banks must proceed with caution and care when approaching the auto lending market. At the same time, U.S. sales growth for automobiles fell in 2016.
J.D. Power and LMC Automotive believe auto sales for August will dip lower by a single digit. The collaborative effort has predicted auto sales will hit around 1.49 million in August, which is a 5.2% decrease from the previous year.
The outlook for the entire year is grim. In July LMC Automotive decreased its outlook for the entire year from 17.7 million to 17.4 million auto sales. Automakers are expected to report August sales Thursday. During the month, there were a total of 26 official selling days, which is the same for the previous year. Recent figures have shown that many consumers are switching from cars to trucks, SUVs and minivans.
Car sales have decreased 8.5% from previous years while truck sales have improved by nearly 9%. This is one of the major reasons Ford (F, Financial) has decided to focus on trucks in China. The Costa Rica car import service has also seen a major increase in the number of tricks being imported into the country.
The Federal Reserve has been talking a rate hike for quite some time now. Well, it appears that it may be coming sooner than everyone expects. Just last week Janet Yellen, the Federal Reserve System chair of the Board of Governors, mentioned the possibility of raising interest rates. She went on to say that the Federal Reserve has held interest rates for an extremely long time.
Wall Street investors continue to replay this comment over and over in their minds. With this being said, one must not forget about the news of Apple’s (AAPL, Financial) unpaid back taxes owed to Ireland. Everyone is hoping that the August jobs report will improve the situation, but will it prove the case for a September rate hike?
Disclosure: I do not own any shares or any stocks mentioned in this article.
Start a free seven-day trial of Premium Membership to GuruFocus.
