vestact posted: " Market Scorecard Yesterday, US markets reversed an earlier decline to close in the green. It's just as well that we had a good start to May, because April was awful. Fears of persistently high inflation and aggressive central bank rate hikes have "
Yesterday, US markets reversed an earlier decline to close in the green. It's just as well that we had a good start to May, because April was awful. Fears of persistently high inflation and aggressive central bank rate hikes have kept most large US-based investors on the sidelines.
The S&P 500 fell 8.8% in April, and is now down 13% for the year, marking its worst start to a year since 1939. The tech-heavy Nasdaq Composite retreated more than 13% last month, its worst showing since October 2008. We remain resolutely optimistic, and are waiting for the inevitable recovery.
In company news, Spirit Airlines fell more than 9% after the affordable airline rejected an acquisition offer from JetBlue Airways, and decided to stick with an existing plan to merge with Frontier. If history is anything to go by, love triangles never work out well for anyone.
On Friday the JSE All-share rose 1.26%. Yesterday the S&P 500 closed up 0.57%, and the Nasdaq was 1.63% higher.
Our 10c Worth
One Thing, From Paul
Amazon reported first-quarter earnings on Thursday night last week, and the shares fell 14% on Friday to $2 485 a share. That was the lowest closing price for the stock since June 2020 and its largest one-day drop since July 2006.
I recall a time when Amazon usually posted quarterly losses, but for the last seven years they have been strongly profitable. This was the first three-month loss in ages, so what gives?
Amazon Web Services did very well, as usual, up 37%. The three problems were (1) weak sales guidance for the second quarter, (2) slow growth in Amazon's online retail business and (3) a big write-down on the value of their investment in electric vehicle maker Rivian.
In hindsight, Amazon's aggressive push to expand during the Covid-19 period was a little hasty. CFO Brian Olsavsky (pictured below) said they were pulling back on the historic surge in adding warehousing space. The number of employees has been trimmed by 100 000 to 1.6 million.
I'm not too concerned about this earnings disappointment. It's not the first time that Amazon has pursued growth at the expense of short-term profits. Online sales will recover and the US consumer is in good shape. In other words, hold Amazon and wait for better days.
As an aside, the company announced that Amazon Prime Day will be held in July this year, and the range of special deals for Prime members will be extended.
Keep in mind too that Amazon's 20-for-1 stock split is approaching. It will trade on a split-adjusted basis on June 6. If you have any questions, let us know.
Byron's Beats
A few weeks ago this Ted talk with Elon Musk was doing the rounds. I finally had the chance to watch it (well actually I listened to it like a podcast while I drove).
Musk predicts that the future is very bright. He thinks we are on the cusp of an era of prosperity spurred by technological advancements, robot assistance and cheap renewable energy. It's no coincidence that an optimist is the richest person in the world. He says that if you are worried about the future, the best thing to do is act to make it better.
I never really bought into his Mars aspirations but he said something in the talk that struck a chord with me. He said that human consciousness is like a tiny candle burning in an eternity of darkness. As far as we know, there is nothing out there like it and it took billions of years of perfect conditions to create life on Earth. The future of consciousness currently rests on one planet. By creating a civilisation on Mars we can mitigate that risk. I can buy into that, but I am certainly not interested in going there.
Give the talk a listen, it's very interesting. Many of his predictions do come true, even though his time frames can sometimes be very off.
Michael's Musings
As mentioned above, April was the worst month for the Nasdaq since 2008. The whole year has been tough, but it hurts even more when the market drops quickly.
These market pullbacks are normal, two years ago markets fell 30% in a few weeks. The big question is, how long will it take for things to rebound? For all of the significant declines of the last ten years, investors have 'bought the dip' and markets have rebounded quickly. Short dips with quick bounces don't feel too bad because they end before you have time to dwell on them. After the 2008 financial crisis though, it took the market four years to recover all the lost ground.
We don't know what the market will do in the next few months. Emotions play a part, so almost anything can happen in the short term. Given the extent of the pullback, the odds are it won't drop too much further. We also don't know how long it will be until stocks recover. We could see a repeat of 2020 where the market recovered all the losses in 3-months, or we could see a slow recovery where it takes a year or two.
It's relatively easy to handle 10% drops, but 20% drops are worrying. Anything more than that, you have to actively work not become hysterical. Since the highs at the end of last year, the Nasdaq is down 25%, so we have reached the point where panicking seems rational. Don't panic. Give us a call, and we can talk through your portfolio prospects? Ask us to turn off the weekly mini-statements for a while? We are here to help.
Bright's Banter
On Thursday, Apple released its best set of results for a non-holiday quarter. I'm not going to go into the numbers today, but I want to draw your attention to how revenue is generated, and how their different divisions performed in the latest quarter.
Apple managed to print double-digit growth in three of its product categories, with Services once again being the star of the show. This is thanks to the growing numbers of active devices and paid subscribers soaring to 825 million across its ecosystem.
Keep in mind that these numbers were achieved despite heavy headwinds from chip shortages, supply chain disruptions and inflation. Here's an infographic of how Apple is performing.
Asian stocks are mostly steady this morning, with no fireworks up or down. US equity futures are slightly higher in early trade. The Rand is trading at R16.08 against the greenback, as an ascendant US Dollar holds on to its recent gains.
Earnings season marches on today with Airbnb, Pfizer, and Starbucks scheduled to report on their latest numbers tonight.
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