vestact posted: " Market Scorecard US markets rose on Friday to record their best month since 2020. Major indexes have clawed back some of the losses from a dismal first half of the year. The slowing US economy has cooled expectations about the scale of Fed interes" Vestact - Money with a dash of funny
US markets rose on Friday to record their best month since 2020. Major indexes have clawed back some of the losses from a dismal first half of the year. The slowing US economy has cooled expectations about the scale of Fed interest-rate hikes needed to tame inflation, which is good for stock prices. The S&P 500 gained 9.1% in July, while the tech-heavy Nasdaq Composite climbed by 12%.
In corporate news, Procter & Gamble fell 6.2% after the maker of Gillette razors and Ariel laundry products said consumers were starting to cut back spending. The biggest gainer on Friday was Amazon, up 10.4% after reporting better than expected results.
On Friday, the JSE All-share closed up 0.47%, the S&P 500 rose 1.42%, and the Nasdaq was 1.88% higher.
Our 10c Worth
Byron's Beats
Last week Microsoft released great results. Revenues increased 12% versus this time last year and would have grown by 16% if the USD had not been so strong. Net income grew 2% to $16.7 billion; this is a hugely profitable business.
Their cloud business grew by an impressive 28% and is now 50% of the group's revenues. That is a big milestone for a relatively new operation. Cloud computing is very defensive in an inflationary environment. In fact, it probably benefits from a bit of inflation because digitising helps businesses to cut costs. Microsoft's customers are trying to improve efficiencies by taking the plunge and moving servers to the cloud.
The Windows and Microsoft Office subscription business is also defensive, if you use these software tools to work, you will not cancel your annual subs. Revenues in business computing increased by 13% and personal computing rose by 2%.
Microsoft returned $12.4 billion to shareholders in the form of buybacks and a dividend for the quarter. This business really does tick all the boxes. It trades at 24 times this year's earnings and continues to show solid growth. Microsoft is an absolute must-have in every investor's portfolio.
One Thing, From Paul
Muddling through. I like that term, and it describes my approach to macro-economic challenges. I always assume that we will muddle through.
Do we face many problems? Yes. Is the world perfect? Of course not. Is inflation too high all over the world? Indeed. Are the companies we own struggling to maintain their profitability and fend off competitors. Always. Do we know what will happen next? No. Should you lose sleep over these problems? Not really.
If a system is complex, it's not helpful to fixate on one or two current issues, and attempt to predict the future. It's also a bad idea to obsess about one supposed solution. Just adjust as best you can to adversity, and make the odd tweak here and there. If you think about it, this is what the Fed is doing now.
If things seem awful, just give it a while. Don't carry the world's worries on your shoulders. Play the long game. Stay invested. Keep calm and carry on.
Michael's Musings
Last week Coca-Cola announced that they would no longer sell Sprite in the well-known green bottle to make it easier to recycle the plastic. The green colouring limits recycling possibilities, so the new bottles will be clear. I assume this initiative will start in the US and then find its way around the globe.
This is a very brave move, given that customers associate this product with that packaging. Coke has spent over four decades building the Sprite brand with a green bottle, that will now be gone. A friend who worked for Bakers Biscuits once told me about a small change to their branding that resulted in a significant drop in biscuit sales.
Consumers get used to seeing a product a certain way; when they see it, they know what to expect. Even the smallest change means consumers reconsider their purchase. It will be interesting to see if there is a change in their sales and how quickly it rebounds.
Bright's Banter
Instagram has paused its rollout of new features on the app following backlash from users, including the Jenner-Kardashian clan and John Legend's wife, Chrissy Teigen. Earlier last week, Adam Mosseri, head of Instagram posted numerous videos explaining sweeping changes to their platform which mostly mimicked TikTok.
Users complained and said these new features resulted in them seeing less content from their friends, which is what sets Instagram apart from the others. I'm glad to see that the management of these big businesses actually pay attention to the people that use their products.
On the other hand, Instagram is within its rights to lead with new product developments. As Henry Ford once said, "if I had asked people what they wanted, they would have said faster horses."
Asian markets are mostly up this morning, but the gains are modest. China is still facing its own economic challenges, including shrinking property sales and a contraction in factory activity. This is weighing on the mainland China and Hong Kong markets.
US equity futures are slightly lower in early trade. The Rand is bumbling around at R16.66 to the US Dollar.
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