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vestact

Oct 27

Market Scorecard

Yesterday, US markets closed in the red as technology stocks dragged down major indices. Lacklustre reports from big tech exacerbated concerns about slowing economic growth and the strong US Dollar. Still, six of the S&P 500's eleven sectors were in the green with energy and healthcare rising more than 1%.

In company news, Meta Platforms sunk 19% in late trade after a set of underwhelming numbers and climbing metaverse costs. Elsewhere, Samsung Electronics shares didn't move much after the company reported weak earnings for the quarter.

In short, the JSE All-share closed up 1.90%, the S&P 500 fell 0.74%, and the Nasdaq dropped by 2.04%.

Our 10c Worth

Michael's Musings

On Tuesday night Visa released a strong set of results. Their revenue, profits, and dividend all came in higher than expected. It is always a positive sign when a company feels confident enough to have a strong dividend increase. The good results meant Visa closed up 4.6% yesterday.

These results also offer a very good look at global consumer spending. Here is what the Visa CFO had to say: "If you just looked at our numbers and didn't look at what people are writing or saying in the media, you wouldn't think there's all this anxiety or uncertainty out there or that people aren't feeling good about things,". . . "The numbers have been steady for nine months and spending is stable almost everywhere in the world and quite strong." Visa has seen "no evidence of consumers feeling a pinch, consumers feeling anxious," he added.

The very profitable cross-border payments have rebounded and are growing. Visa noted that due to bottlenecks with hotels and airlines, some consumers weren't able to have their post-Covid holiday. With pent-up demand, Visa is expecting continued strength in global tourism.

As it stands, both Visa and consumers are doing well. Let's hope that we don't talk ourselves into a global recession.

Byron's Beats

Many pundits are saying that a recession in the US is inevitable. Every time in history that we have seen inflation spike above 5%, it has taken a recession to calm prices down. That is exactly what the Fed is trying to achieve by increasing rates. Lower demand means lower prices.

So why would you buy shares now if there is a recession around the corner? Because stocks normally bottom before the economy. Take a look at the image below created by Michael Batnick from Ritzholtz Wealth. The dotted blue line shows the stock market. The khaki line shows GDP.

In all 6 recessions from 1957 until 2020 the market dips before the economy. Earnings lag the economy so we may well see poor earnings next year while the market recovers. Of course it's different every time but the market is pretty good at predicting the future, be it a fall in GDP or a recovery.

Bright's Banter

Intel has priced Mobileye's IPO above the top of its targeted range. The self-driving car unit will raise $861 million by selling 41 million shares, valuing the company at roughly $17 billion. This price is at least $2 billion higher than what Intel paid for it in 2017, but still a far cry from the $50 billion that the chip giant originally hoped for last year.

According to Dealogic, IPOs in the US have only managed to raise around $7.4 billion year-to-date, putting 2022 on track to be the worst year for new issues in decades.

The Israeli manufacturer of processors for the self-driving market will go public on Wednesday on the Nasdaq under the ticker MBLY in what is expected to be one of the largest listings of the year.

Linkfest, Lap It Up

Video games are a big part of our culture. Is it good for children to play them though? Research says there are positives - Kids who play video games score higher on brain function tests.

Rolls-Royce announced its first all-electric car. The Spectre Coupe is 5 meters long, and 2 meters wide sitting on 23-inch wheels with a range of 310 miles - Inside the world's most luxurious electric car.

Signing Off

Asian markets advanced this morning thanks to the continued rally in tech companies. Markets in Hong Kong, Japan, and South Korea are in the green, while mainland China remains little changed.

Oil touched its highest level in two weeks after US Secretary of State Anthony Blinken said a deal with Iran is unlikely to progress in the short term.

In early trade, US futures are bouncing back up from the tech earnings worries. The Rand is trading at R17.95 to the greenback.

It's almost Friday, hang in there!

Sent to you by Team Vestact.

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