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Market Scorecard
All three major US indexes closed down for a third consecutive week last Friday. The S&P 500 has had its worst period of weakness since March 2020, and the tech-heavy Nasdaq has now fallen for four weeks in a row. It hasn't been an easy journey, especially for investors who recently put capital to work. See Paul's comments below, and perhaps you will take heart? We will hold the line.
In company news, General Motors is planning to invest $6.5 billion on two Michigan sites for electric vehicle battery production. Elsewhere, American Express has added new art to its high-end platinum cards, designed by artists Kehinde Wiley and Julie Mehretu.
On Friday, the JSE All-share closed down 1.83%, the S&P 500 lost 1.89%, and the Nasdaq dropped 2.72%. Not pleasant!
Our 10c Worth
One Thing, From Paul
The S&P 500 is down 8.3% from its 3rd of January record closing high of 4,796. The financial media is full of scary headlines about inflation, the Fed, oil prices, Omicron, the Ukraine, and more.
As a result, I received messages over the weekend from a few anxious clients. They all asked (I'm paraphrasing): "it's down a lot and it hurts. Is this the start of a big crash?".
I don't think so, no. Covid is ending and I'm dead sure that the US Fed won't act irresponsibly. I'm expecting a good year, after this wobbly start.
Please note that 5% pullbacks and 10% corrections happen more often than not in any given year. Ignore the big Covid fall in March 2020 for a moment. Do you recall the 10% drawdown in 2018, another one of 14% in 2016, a 12% slump in 2015, a 10% crack in 2012, a nasty 19% puke in 2011, and an even worse 16% sinkhole collapse in 2010?
Can you remember what the reasons for those slumps were? Not likely. Exactly. So keep calm and carry on.
Byron's Beats
The Fintech space in the UK has been developing fast. One of the leaders is a digital-banking app called Revolut. According to Reuters Revolut have just launched commission-free stock trading in the US. This product will compete with the likes of Robinhood and Charles Schwab. As we have learnt, these companies make money by selling the order flow.
The article points out that retail investors bought $281 billion worth of shares in 2021. That is up sevenfold from the $38 billion 2019. Just wow! This seems like a good place to be offering services. However, the recent market drop has undoubtedly dished out some hard (and probably overdue) lessons to unseasoned traders.
Revolut has ambitions to be a super-app that covers all your financial needs under one platform. We, of course, already have exposure to the 800-pound gorilla in this space, PayPal.
Michael's Musings
Last week Amazon announced their first physical store for men's and women's fashion, called Amazon Style. Yes, you read that correctly. The 'department store killer' is opening a brick and mortar store of their own. For now, it is a concept store to see if they can also make a success of this more-traditional distribution channel.
A unique feature of this store is that there is only one item on display of each type of clothing. The bulk of the stock is kept in the back. This allows the store to use less floor space, saving money, and makes it look less cluttered. If you like a piece of clothing, you go up to it, scan a QR code and then choose your colour and size. From there, it can either be sent to a fitting room or to the check-out counter.
Amazon is planning, I assume, to use their data from online sales to stock the store with the most sought-after items. Having fewer 'dud' items on the floor will help improve each store's profitability. I suspect that Amazon will also be testing to see how sales patterns differ between people buying items online versus being able to feel and touch them in-person. For me, the only clothes I buy online are from brands I already know because I have tested their fit and feel with other products.
Time will tell if Amazon Style will stick. For a company the size of Amazon, the cost of one store is a rounding error. It is good to see them experimenting.
You can watch the Amazon demo video here - Introducing Amazon Style.
Bright's Banter
Autograph raised $170 million in a Series B funding round, co-led by Andreessen Horowitz and Kleiner Perkins. Autograph is an NFT platform that was co-founded by professional football player Tom Brady in July 2021. So far the company has launched NFT collections featuring Brady, Tiger Woods, Naomi Osaka, The Weeknd, Simone Biles, Tony Hawk, and Derek Jeter.
It is crazy that we're slap bang in the middle of a crypto meltdown, but these private businesses are fetching unbelievable valuations as if everything is okay.
According to PitchBook, the LA-based company was already valued north of $700 million in a $35 million capital raise six months ago. I wonder what these web3.0 businesses are going to pivot to when they realise that NFTs have a finite value.
Linkfest, Lap It Up
Satellites orbiting Earth captured a powerful undersea volcanic eruption from space last week. The eruption is about seven times more powerful than this volcano's last outburst - Explosive underwater volcano eruption in Tonga.
Did you know that it can snow in the desert? It turns out that it's a fairly common occurrence - In pictures: Snow falls in Algeria's Sahara Desert.
Signing Off
The week ahead is a big one for US earnings, and by extension, crucial for market sentiment. We will be especially focused on numbers out from these Vestact-recommended stocks: Apple, Microsoft, Visa, Johnson & Johnson, Stryker and Tesla.
Asian markets are mixed this morning, but shares in Japan have pressed into the green. Hong Kong is down solidly but markets in mainland China have eked out gains.
US futures are up nicely in early trade, so perhaps we are gearing up for a much-needed rebound. The Rand is trading at R15.15 to a weakened US Dollar.
Have a productive week ahead! Look out for our regular comments each morning, always balanced, mostly cheerful.
Sent to you by Team Vestact.