Market scorecard
US markets were down by more than 1% yesterday on renewed concerns over the health of the banking sector and jitters about the Fed's interest rate decision later today. Energy and banking shares were among the biggest losers. PacWest Bancorp and Western Alliance Bancorp both tumbled by 15%.
In company news, Starbucks fell 5.6% in after-hours trading as the coffee giant reaffirmed its full-year guidance, a cautious move that appeared to disappoint Wall Street. Elsewhere, brewing giant Molson Coors Beverage Company rose 7.7% on strong sales to thirsty youngsters.
At the end of the day, the JSE All-share closed down 0.88%, the S&P 500 fell 1.16%, and the Nasdaq was off 1.08%. Hopefully today will go better.
Our 10c worth
Michael's musings
Last week Meta Platforms posted very strong results, pushing the stock up 14% for the day. The company beat expectations for revenue and profits, and set guidance for the coming quarter higher than previously forecast. Its underlying operations, Facebook, Instagram and WhatsApp each performed well.
Over the last year and a half, the market worried that Meta was losing its way and becoming irrelevant. It was burning through billions trying to create the metaverse, while its core business was going backwards. That's all changed. User numbers are growing again, ad revenues are up and the metaverse focus is shifting to AI advertising tools.
Mark Zuckerberg declared 2023 as the 'year of efficiency', and expects spending to drop $10 billion from previous estimates due to changes in company structures and curtailing research.
Since the stock price's low in November, it's up 177%, but still needs to advance by another 58% to get back to all-time highs. We've gone through a full cycle from loved to hated to unsure to loved again. If you don't like the social media theme, now could be a good time to sell. Otherwise stay invested as Meta keeps making cash from people's obsession with scrolling through our social feeds on our web-connected devices.
One thing, from Paul
The US Federal Reserve open market committee (FOMC) will be out with an interest rate decision later today. You can see their schedule of meetings for the rest of the year here.
The market expects another hike of 25 basis points (0.25%) today. The current midpoint of the federal funds rate is 4.875% so if that happens, rates will be above 5% for the first time since 2006. What's more, they will have reached that level from zero, just more than a year ago. That's extreme!
We've spent the last two years talking about US inflation and interest rates, which is incredibly boring, but unavoidable. Warren Buffett says "interest rates power everything in the economic universe. Interest rates are to asset prices like gravity is to the apple. When there are very low-interest rates, there's a very small gravitational pull on asset prices."
We believe that the Fed will stop hiking soon, which will be market positive. Largely because inflation is coming down, and there is stress in the US banking system, as you can see from recent regional bank failures.
Byron's beats
The Nasdaq is up 16.3% so far this year, which is a fantastic return in four months. If you annualise that number it gives you 48% which is of course a very unlikely result for the whole year. This comes after a shocking 32% drop in 2022.
If something falls by 32% it needs to recover by 47% to get back to even. So the Nasdaq needs to keep up the current run rate for the rest of the year to return to the levels of late 2021. As I say, unlikely.
If you sent us a lump sum to invest at the beginning of 2022 you will still be feeling despondent about your returns, even after a good 2023 so far. However, if you had added to your account regularly after the initial lump sum investment, buying through the dip, you would be a lot closer to breaking even now, or even up, thanks to dollar-cost-averaging.
It is important to constantly add to your holdings, it reduces that once-off timing risk.
Bright's banter
ZJLD Group is a holding company for 12 spirits brands controlled by Wu Xiangdong, who is also known as the Baijiu Godfather. The company just pulled off Hong Kong's biggest listing of the year after raising around $637 million. This added $3 billion to Wu's personal fortune.
Baiju is a clear Chinese liquor, containing between 35% and 60% alcohol by volume. That must pack a searing punch. Each type of baiju apparently uses its own type of qu for fermentation to create a distinct and characteristic flavour.
Wu Xiangdong's first liquor brand, Jinliufu, became a household name in China two decades ago thanks to a TV commercial starring football coach Bora Milutinovic, who took the country's national team to the World Cup in 2002.
Backed by KKR, the company is the first baijiu-maker to list outside of mainland China. ZJLD is the fourth-largest seller of baijiu among private producers and posted a 15% revenue jump last year to $850 million.
ZJLD is set to benefit from a trend towards premium baijiu in China's market, as consumers become more willing to upgrade. So basically this guy has taken China's mqombothi to the mass market and now he's cashing in big time!
Linkfest, lap it up
US cigarette smoking has dropped to an all-time low. Only one in nine adults are still lighting up - Government survey on tobacco use.
Apple savings accounts have been well-received. The tech-giant has a rock-solid balance sheet - Apple draws $1 billion in deposits in first four days.
Signing off
Markets are shut in Japan and mainland China for public holidays, meaning there's no trading at all. Those Asian bourses that are open, are down.
The Rand is at R18.45 against the US Dollar. US equity futures are higher this morning, but we expect low market volumes until the Fed's interest rate decision tonight, at 20h00 SA time.
All good things come to those who wait.
Sent to you by Team Vestact.
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