As investors flee to the safety of US Government Bonds as the heat is ratcheted up in a potential escalation of US-China trade tensions, it has been a challenging time for most of the largest listed US recruitment businesses.
Over the period 21st March to close of markets on 30th May, the S&P 500 has drifted down by 2.3 per cent from 2854 to 2788 and is now in negative territory for the past 12 months. This is a familiar story for investors in the listed US recruitment sector.
Robert Half International, with a market capitalisation of $6.58 billion (and P/E ratio of 14.86), has plunged 16.9 per cent over the two months or so since 21st March, moving from $66.37 to $55.09. It is almost 14 per cent down over the last 12-month period. ASGN, with a market capitalisation of $2.78 billion, has dropped 19.7 per cent from $64.64 to $51.88. It is now down a staggering 33.88 per cent over the past year.
AMN Healthcare and KForce have each de facto treaded water in terms of share price movement over the past two months; the former (with a market cap of $2.25 billion) has fallen some 16 cents from $49.24 to $49.08 while the latter (market cap of $917 million) has dropped just a single cent from $35.97 to $35.96. AMN healthcare is, however, down over 13 per cent over the last year whereas by contrast to all the stocks featured above, KForce remains in positive territory for the past 12 months (it has risen by 6.71 per cent).
It has been a similar story of nursing losses over the past two months for Heidrick & Struggles (market cap of $590 million) and Insperity (market cap of $4.66 billion). The former has crashed over 23 per cent from 21st March to 30th May moving from $40.57 to $31.34. The latter has experienced a more modest decline (9.2 per cent) from $126.97 to $115.23. Interestingly, and very much an outlier, Insperity is up a remarkable 25.6 per cent over the past 12 months.
Manpower Inc (a market capitalisation of $5.34 billion) has managed to buck the negative trend of peers and has edged up by over 3.5 per cent from $85.85 to $88.88; it has, however, moved into negative territory for the past 12 months over which period its share price has declined 4.3 per cent. Kelly Services is the other recruiter to see a price rise over the past two months; the business, with a market cap of $924 million, has climbed from $22.37 to $23.77 and also remains up by 3.5 per cent for the last 12 months.
Despite the fact that US economic growth remains robust (it was revised recently to 3.1 per cent for the first quarter) the growth rates of other larger economies have slowed down and investors remain concerned about the likelihood of US-China trade disputes (tariff salvoes have been fired already) escalating into a full scale “trade war”.
Investor worry is evidenced by the sell off equities markets and the move into the safety of 10-year Government Treasury Bonds. The yields of the latter have hit 20 month lows.
Furthermore Richard Clarida, vice chairman of the US Federal Reserve, has commented that there may appetite to lower interest rates (currently at the 2.25-2.5 per cent range) on the part of the Fed if lower than expected inflation persists. The rate has persistently been below the two per cent target despite relatively low unemployment.
All of the above makes the G20 summit commencing on 28th June of particular significance for investors as hopes of a cooling of tensions between US and China recede. Little more than a truce had been expected in any event, especially in light of President Trump’s remarks that the US was not ready to do a deal at the present time. Should even a truce be unachievable it is expected that the US will impose 25 per cent tariffs on a further $300 billion worth of Chinese products. Markets would then be braced for the Chinese response. As ever the G20 summit will be closely monitored by investors.