Market Scorecard
US markets had a sad session yesterday, with both major indices closing deeply in the red. This was probably 'profit-taking' by traders ahead of likely interest-rate hikes by the Fed and ECB. Of the 11 sectors in the S&P 500, 10 posted declines to start the trading week, with Energy, IT and communication services being the biggest laggards. Consumer staples ended in the green.
What was most broken last year, is doing the best in 2023. According to Dow Jones Market Data, 48 of last year's 50 worst-performing companies in the S&P 500 are up this year by an average of 17%. Conversely, last year's standouts are not doing so well. 30 of last year's 50 best-performing S&P 500 stocks are up only 1% on average in January.
In company news, Samsung fell 3% after profits slumped on poor demand for semiconductors and weakness in smartphones and memory chips. Elsewhere, GE Healthcare Technologies closed up 2%, after the company reported its first quarter as a standalone listed entity. Finally, Ford Motors closed down 2.9% as it said it would cut prices and boost production of its Mustang electric crossover vehicle.
Yesterday, the JSE All-share closed down 0.58%, the S&P 500 dropped 1.30%, and the Nasdaq was a whole 1.96% lower.
Our 10c Worth
One Thing, From Paul
Are you a grandparent? Many of our clients are. I'm not one yet, although I do have adult children. I'm looking forward to the day when I have a new descendant or two to help look after!
According to The Economist, since 1960 global life expectancy has risen from 51 to 72 years. At the same time, families are having nearly half the number of children, which means the ratio of living grandparents to kids is steadily rising. They reckon that there are now 1.5 billion grannies and grandpas out there.
Grandparents can be useful as childminders, and if they are well-off they can help to cover the expenses of raising a family. It's also good for older people to stay active and engaged with the younger generation. As with everything, managing these relations requires openness and good communication.
Read about these trends here (may require a free registration): The age of the grandparent has arrived.
Byron's Beats
The Dollar has dropped by 11% to a basket of currencies since its peak in September 2022. If you are a Vestact client with USD-denominated investments, you might think that is a bad thing. But there are a few silver linings.
All the businesses we invest in have large international operations. When the Dollar is strong, they make less USD from their international business units and this is a big drag on earnings. A weaker Dollar is therefore a good thing for most of your holdings.
As a South African with a goal of growing your offshore nest egg, a weaker Dollar allows you to get more bang for your Rands when you send them out. For the record the Dollar peaked to the Rand at the beginning of November last year at around R18.40. It's now at R17.37 which is 5.6% stronger than that level. The Rand has clearly underperformed the general basket, and we only have ourselves to blame.
Michael's Musings
We are sometimes asked why we don't invest in bonds on behalf of our clients. The first answer is that we don't have any skills in managing bonds. But more importantly, stocks give a much better long-term return.
With people living longer, it makes sense to be fully invested in stocks for most of your working life. If you retire at 60 and live till 85, your early years of retirement will probably also involve a very high equity allocation for your retirement fund. Unfortunately, the returns from bonds and cash are eaten away by inflation.
Ben Carlson uses historical data to go deeper into the topic. An interesting stat from the blog is: "One of the craziest things about the historical performance of the US stock market is you have been more likely to earn a return of 20% or more in a given year than experience a loss."
Read more here - Is it realistic to have 100% of your portfolio in stocks?
Bright's Banter
Gucci announced that Italian designer Sabato De Sarno will become their next Creative Director. The Kering-owned brand has been without a creative leader since the departure of Alessandro Michele on the 23rd of November.
The Naples-born designer De Sarno began his career at Prada in 2005, before moving to Dolce & Gabbana. In 2009, a formative shift saw him join Valentino, where he would eventually become the house's fashion director, overseeing both women's and men's collections.
"102 years after Guccio Gucci opened his first store in Florence, Gucci remains one of the most iconic, prominent and influential luxury houses in the world,' said François-Henri Pinault, chairman and CEO of Kering. "With Sabato De Sarno at the creative helm, we are confident that the house will continue to influence both fashion and culture through highly desirable products and collections."
Gucci management confirmed that De Sarno will debut his runway collection at the Women's Fashion Week in Milan in September.
Linkfest, Lap It Up
The South African Airways Museum is the only one in the world with two 747s. One of them is the plane that flew over Ellis Park in 1995 - Jumbos at Rand Airport are worth a visit.
TikTok changed social media's rulebook. Facebook and Instagram require a network of friends to follow, but TikTok just works - Upheaval on the social media landscape.
Signing Off
Asian markets are down this morning. Bourses in Hong Kong, Japan, South Korea and mainland China are all in the red. After a good run, we are being reminded that stocks don't only go up.
China is reporting industrial profits and manufacturing data and the Eurozone will update its GDP numbers. We are keyed up about earnings from many top companies today, including Amgen, PayPal, Stryker, Exxon Mobil, Caterpillar, Pfizer, McDonald's, Spotify, Mondelez, Snap Inc. and AMD.
US equity futures are lower in early trade. The mood is tentative ahead of the Fed's interest rate decision tomorrow.
Stay strong!
Sent to you by Team Vestact.
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