Market Scorecard
US stocks ended the first quarter on an optimistic note. It's been a newsy three months, with banking collapses and reactions to inflation data. The S&P 500 rose 3.5% last week, the most since November. The S&P 500 is up 7% since the start of the year, while the Nasdaq is up 17%. That's the biggest quarterly gain since June 2020. Booyah!
Speaking of inflation, the Fed's preferred gauge, the personal consumption expenditures price index excluding food and energy, rose 0.3% in February, slightly below the median estimate. As you know full well by now, calming inflation suggests the Fed may be close to ending its aggressive rate-hiking campaign, which is good for stocks.
In company news, computer-memory maker Micron Technology fell 4.4% because it's been hit by a retaliatory cybersecurity investigation from Chinese authorities. Elsewhere, Digital World Acquisition, the SPAC that plans to merge with Trump's social media company gained 7.6%. The biggest gainer on the S&P 500 on Friday was
Align Technology (+7.1%) which makes teeth-straightening devices.
On Friday, the JSE All-share closed down 0.79%%, the S&P 500 rose 1.44%, and the Nasdaq closed 1.73% higher.
Our 10c Worth
One Thing, From Paul
There is nothing worse than a "Monday morning quarterback". The term describes someone who passes judgement on something after the event. It comes from NFL football fans who have strong opinions about the mistakes of dumb players, from the safety of their couches, a day later (most games are played on Sunday).
Very annoying market pundits have been shouting about how the Fed are "idiots" for getting monetary policy "wrong" because of what happened with US inflation. They argue that the Fed was late, and then had to hike too fast, causing the stock market slump of 2022.
Sam Ro took up the issue in his newsletter over the weekend: "Specifically, many point out that inflation has been stubbornly high because the central bank made a mistake by being too slow to remove stimulative monetary policy." He says that if the Fed had hit the brakes on the economy when inflation started heating up in 2021, a lot of US workers would have been unemployed today, and the economy would have been much weaker.
He's right, just look at the facts. Inflation really became alarming back in June 2021 when CPI went above 5% but at that time total US payroll employment was only 147 million. By waiting until March 2022 to start hiking, total payroll employment rose to 152 million by June of 2022 and a record 155 million by February 2023.
Anyway, that's all old history. The members of the Fed's voting committee did what it thought best, at every meeting, with the information at its disposal.
Now, inflation is subsiding and stocks rallied last week, with the S&P 500 rising 3.5%. The index is now up 14.9% from its October 2022 closing low, and only down 14.3% from its all-time closing high at the start of 2022. Keep calm and carry on.
Michael's Musings
Vestact currently has 851 funded accounts in the US. It's interesting to see the different client mindsets when the market goes up and down, and the Rand - Dollar exchange rate changes. Most clients hate sending money to their US portfolios when the Rand has weakened significantly. Thanks to the SARB's higher-than-expected interest rate hike last week, the Rand has strengthened to have '17' in front of it again.
When is the best time to add to your portfolio? In most cases, the best time to add is when the cash is available, particularly given the significant market drop in 2022. Your alternative is to leave it in the bank, where it will slowly lose value because of inflation.
According to economic gauges like PPP or the 'Big Mac Index' the Rand is weaker than it should be. Other factors like the negative sentiment towards South Africa and the billions of Rands we sell monthly to buy diesel for generators, will probably keep the Rand weak for the foreseeable future.
If you are waiting for the Rand to get stronger before adding to your US investments, you will still be in Rands while the US market recovers its losses from last year. In my opinion, the market is going to climb quicker than the Rand is going to strengthen.
Bright's Banter
The Swiss luxury watch industry broke records in 2022, with exports reaching CHF23.7 billion, an increase of 11.6% year on year. The growth is even more impressive when compared to 2019, with exports up by 15.5%.
Smartwatches, especially the Apple Watch, have affected the entry-level segment of Swiss watchmaking, causing a decline in volume over the years. This trend of rising values for Swiss watch sales but falling volumes has been the case for the last 20 years.
The declining volume over the broader industry illustrates that the average export value of a Swiss watch increased by an average of 51% from 2019 to 2022, rising from CHF 993 to about CHF1 500.
Only 17% of volume accounts for 83% of value, and Switzerland exported about 25 000 watches with a retail price above CHF100 000, just 0.2% of a total of 15.8 million watches exported, but they accounted for CHF3 billion of export value, or 12.5% of the total value.
The top five brands - Rolex, Cartier, Omega, Audemars Piguet, and Patek Philippe - continue to outperform the broader industry, capturing a consolidated market share of 53.7%.
Conversely, Tissot fell out of the top ten brands in terms of revenue, largely due to its dependence on the weak Chinese market, while Breitling and Vacheron Constantin entered the top ten.
Rolex outperformed the market and consolidated its supremacy as the biggest luxury watch brand in the world with an estimated 21% growth in revenue, matched by a 14% increase in volume, with its 2022 production tally standing at 1.2 million units.
Linkfest, Lap It Up
Would we be better off if we had younger leaders? Is experience more important than energy and fresh ideas? - The ages of world leaders.
Solar meadows are ecological superheroes. They nourish pollinators, recharge groundwater, prevent soil erosion and sequestering carbon - Solar farms have secondary benefits.
Signing Off
Asian markets are jumbled up this morning. Shares edged higher in Japan, mainland China, and South Korea, while Hong Kong slid. This comes after the Caixin manufacturing PMI data registered a larger-than-expected drop, suggesting some weakness in China's economic recovery.
A surprise crude oil production cut from OPEC+ over the weekend has driven oil prices about 5% higher. The group decided to reduce output by more than one million barrels a day. Goldman Sachs revised its price forecast for Brent crude, projecting it to reach as much as $95 per barrel this year and possibly $100 in December 2024.
It was an exciting weekend in Finland, with news of their accession to NATO followed by the loss of left-wing Prime Minister Sanna Marin's party in parliamentary elections. Down here in South Africa, the news was fairly boring.
US equity futures are on the back foot in early trade this morning, suggesting a bumpy open. The Rand is trading around R17.87 against the US dollar.
This will be short work week, with only four days to go to Easter. Try to make the most of it.
Sent to you by Team Vestact.
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