Week 15.07 - 21.07: Rough week for Chip Stocks, Musk's X Plans, Big Bank Earnings and more...
Weekly Investor Digest
Key Stats of the Week
👓 $1.5B - Amount EssilorLuxottica paid to acquire streetwear brand Supreme
🍷 2% - UK inflation rate in June, remaining stable as the Bank of England closely monitors economic indicators
💰 $43.6B - JPMorgan Chase's record quarterly profit, up 67% from the previous year
🇨🇳 6.3% - China's GDP growth rate in Q2 - indicating an economic slowdown impacting global markets
📱 $3T - Apple's market capitalization after reaching new stock highs due to AI platform predictions
🏅 $2,000+ - Gold price per ounce - which reached a record high as investors seek safe-haven assets
Subscribe to never miss another issue:
Chart Of The Week
The chart shows us how the biggest companies in the S&P 500 are doing compared to the smaller ones.
Here's what you need to know:
The Ratio Game: When the blue line goes up, it means big companies are outperforming smaller ones. Right now, we're seeing this happen.
AI Hype: The recent spike is largely due to excitement around artificial intelligence. Big tech companies are riding this wave, pushing their stock prices up.
Bubble Watch: The ratio has climbed above the +2 standard deviation mark. In plain English, this means the market is getting a bit frothy, but...
Not Dot-Com Crazy (Yet): We're not at the extreme levels we saw during the 2000 dot-com bubble. Back then, the ratio went beyond +3 standard deviations before crashing.
Historical Context: The chart gives us a 30+ year view. This helps us see that while today's market is hot, it's not unprecedented.
What This Means for You:
✅Caution Flag: The market is showing signs of potential overvaluation, especially in AI-related sectors.
✅Diversification Reminder: When big companies outperform this much, it might be time to check if your portfolio is too top-heavy.
✅Learning from History: Keep an eye on this ratio. If it keeps climbing rapidly, it could signal increased market risk.
✅Opportunity Lens: Smaller companies in the S&P 500 might be relatively undervalued right now. Worth a look?
Weekly Sector Performance
🤝 M&A Roundup
🎬 Entertainment: Amazon's Prime Video unit acquired Bray Film Studios, known for classic Hammer horror productions like 'Dracula' - expanding its content creation capabilities.
📱 Telecom: Vodafone sold a further €1.3 billion stake in its European phone masts business as part of CEO's plan to simplify operations and reduce debt.
🚼 Consumer Goods: Mubadala bought a majority stake in Dutch buggy brand Bugaboo from Bain Capital, valuing the company at several hundred million pounds.
⛽ Energy: Australian oil and gas group Woodside acquired Tellurian to strengthen its position as a 'global LNG powerhouse', focusing on Louisiana export terminal development.
📰 Media: The Telegraph and Spectator attracted over seven bids ahead of the first-round deadline - drawing interest from various media groups, investors, and billionaires.
⚽ Sports: The Friedkin family's deal to buy Everton FC collapsed, prompting the club to explore 'alternative options'.
🏫 Education: Private equity giants including Bain Capital, Permira, and Veritas Capital are competing in the final round of a $15 billion auction for Nord Anglia Education.
👓 Tech-Retail: Meta is exploring a multibillion-dollar stake in EssilorLuxottica, aiming to expand its smart glasses partnership with the Ray-Ban maker.
🍷 Beverages: Pernod Ricard sold its wine brands, including Jacob's Creek, to focus on the premium spirits market.
This Week in Short
Big Bank Earnings
Most big US banks reported higher profits this quarter.
JPMorgan, Morgan Stanley, and Goldman Sachs saw significant profit increases.
These gains are largely due to higher interest rates and increased deal-making.
Strong bank performance often signals a healthy economy, but investors should stay alert for signs of overheating or risky lending practices.
Gold Price Record
Gold prices hit a record high as investors anticipate interest rate cuts and seek safe-haven assets.
This trend highlights again how gold often rises during times of economic uncertainty.
And while gold can be a good portfolio diversifier - remember it doesn't produce income like stocks or bonds.
UK Inflation and Interest Rates
UK inflation remained at 2% in June, with services inflation staying high at 5.7%.
These figures mean something as they influence interest rates - affecting everything from mortgages to stock valuations.
So even when headline inflation looks stable, it's important to watch sub-categories like services inflation.
Kaspersky Lab Leaving US
Russian cyber-security firm Kaspersky Lab is closing its US operations after being labeled a national security risk.
This move highlights how cybersecurity is becoming a geopolitical issue.
When investing in tech companies, it's now all the more important to consider their country of origin and potential political risks.
Electric Vehicle Market Challenges
GM has scaled back its EV production goals due to slower market growth.
Meanwhile, the UK isn't imposing tariffs on Chinese EVs, unlike the EU.
These developments show the EV market is facing real-world challenges as it matures.
When investing in emerging industries - be prepared for growth projections to change.
HSBC Leadership Change
HSBC has named Georges Elhedery as its new CEO, starting September.
As a long-time insider with experience in Middle Eastern markets, Elhedery could reshape HSBC's strategy.
We might see a stronger focus on emerging markets or digital banking.
Investors should watch for shifts in HSBC's global approach or risk appetite under this new leadership.
China's Economic Slowdown
China's GDP growth has slowed - strongly impacting global markets and luxury brands like Burberry.
This slowdown affects various sectors worldwide - which shows the importance of China's economy to global markets.
Diversifying investments across different regions can help mitigate risks from any single country's economic issues.
Apple's AI Boost
An analyst's positive prediction about Apple's new AI platform drove the company's stock to new highs.
Its proof of how AI is seen as a major growth driver in tech.
However, investors should be cautious of AI hype leading to overvaluation. One must remember to assess a company's actual AI capabilities and implementation.
Macy's Rejects Buyout
Macy's has turned down a buyout offer, preferring to focus on its own turnaround plan.
This decision is a reminder that sometimes companies believe they can create more value independently.
While rejected buyouts can cause short-term stock drops, they might signal long-term confidence. Keep an eye on how Macy's executes its turnaround plan.
Chip Company Stock Volatility
Chip stocks experienced volatility due to geopolitical comments about Taiwan, but later recovered.
TSMC reported strong earnings despite the turbulence.
The situation demonstrates how the chip industry is sensitive to geopolitical tensions.
It's a reminder not to make hasty decisions based on short-term news.
Elon Musk's Company Moves
Elon Musk has threatened to move X and SpaceX from California to Texas due to disagreements over state laws.
It would be wise to watch for any actual moves by these companies and potential effects on their operations and talent retention.
Stocks - Performance Recap
📈WINNERS:
United HealthGroup (UNH, +10.52%)
Schlumberger (SLB, +7.00%)
Starbucks (SBUX, 5.93%)
D.R. Horton (DHI, +13.07%)
📉LOSERS:
Lilly & Co (LLY, -9.59%)
Advanced MicroDevices (AMD, -16.54%)
ASML Holding (ASML, -17.50%)
NVIDIA Corp (NVDA, -8.75%)
Novo Nordisk (NVO, -7.42%)
Thanks for reading The Weekend Investor.
Subscribe for free to receive new posts and support my work.
Like this?
You’ll get a ton of value from these other newsletters I read: