The Magellan Financial Group Ltd (ASX: MFG) share price has been smashed today. Magellan shares opened at $52.63 but have since plunged 4.6% to sit at $50.99 at the time of writing.
Magellan's share price is now 18% off the all time high of $62.60 that the company reached in late July and seems to be in something on a sentiment slump. Nonetheless, this high-flying financial stock is still up almost 120% for the year so far, so long term shareholders don't really have a lot to complain about.
But let's have a look at what might be causing today's moves.
What's going on with Magellan?
No major news has come out of the wealth manager in the last few days, apart from the Notice of the 2019 Annual General Meeting, which was released this morning before market open. I can report that all major executives are standing for re-election, including director Hamish Douglass, but this isn't market-moving stuff.
It's likely that the news overnight that Speaker of the US House of Representatives, Nancy Pelosi will be proceeding with impeachment proceedings for President Donald Trump has rattled markets around the world – probably why Ms. Pelosi waited until 'after the bell' over in the US to announce this decision.
If impeachment is successful, it will result in the removal of President Trump from office (although this seems unlikely at this point).
Further adding to the gyrations on international markets was President Trump's excoriation of China's trade practices at the United Nations overnight, in which the President stated that the days of China stealing intellectual property and trade secrets, manipulating its currency and hiding behind "massive market barriers" are over – implying that a trade deal is still a ways away and significant differences remain between the two sides.
This double whammy has spooked investors across the stock and bond markets overnight and because Magellan is a company that is significantly exposed to markets through asset management, the MFG share price is responding in a disproportionally negative way.
Foolish Takeaway
At the end of the day, Magellan's funds under management and ability to collect performance fees are very dependent on rising markets – and signs of bearish sentiment do not bode well for this company's future earnings. Although I think Magellan is a high-quality company, it is also a bit too cyclical for my liking. In my opinion, the risks outweigh the rewards for an entry at these prices, and so I'll be sitting on the sidelines on this one.
