Week of October 24th, 2022 - Rebounding
Three things to recap this past week.
The markets opened and closed the week on a high note, with both rallies resulting in considerable gains for all three major U.S. Indexes. The Dow Jones finished up 4.9%, the NASDAQ 5.2%, and the S&P 500 4.8% as investors rallied hard following promising quarterly earning’s news and chances for increased interest rates. The second week of earnings results showed surprising growth, beating analysts’ expectations. Third-quarter net income is now projected to rise 1.5% from this time last year, a mark above the 1.3% expected by investors.
However, Treasury yields continued to rise this week, recording a high of 4.60% mid-week, the highest it’s been since 2007. This increase in yield rates signifies investors taking money out of the market — not a good sign for traders looking to see a consistent move upward for the market. Despite inflation and recession concerns, the labor market continues to hold firm, with unemployment claims down from the previous month. This key metric demonstrates that the labor market continues to stay strong amidst concerns about an economic downturn.
2. The Bigger They Are…
Tech giants across the board have started to fall recently. The expression “the bigger you are, the harder you fall” is clearly shown by the leading tech companies, as the effects of the pandemic are seeming to hit companies like Google and Microsoft 2 years after its original effects. With Amazon down 32% and Google down 28% in the 12 months, investors fear that the downturn could be a delayed result of the pandemic.
Tech companies, expecting their unexpected pandemic growth to continue, overhired and overproduced supplies. Now forced to lay off employees, many analysts believe that the companies are simply succumbing to the opinions of their shareholders, trying to minimize losses and maximize their on-paper profitability.
3. FedEx Origin Story
The household delivery name, FedEx, is synonymous with overnight delivery in the present. However, in its early days, FedEx wasn’t as successful as you would imagine. Millions of dollars in debt, with their funds dwindling and not enough money to buy fuel for their planes, the owner of FedEx, Frederick Smith, took a ridiculous risk. Taking the last $5,000 in FedEx’s coffers, he impulsively traveled to Las Vegas and gambled it on a game of Blackjack. Walking out of the casino with $27,000, Smith was able to continue operations and took the win as a sign of things to come. Fast forward a couple of years, FedEx became a public company and its success continued. The company now delivers over 1.2 billion packages across 220 countries around the globe, and it is now worth $39.37 billion.
Off strong earnings results, the market rebounded to recoup some of the recent losses it has endured. Contributing to these losses is the downfall of the market’s tech companies due to the delayed effect of COVID. FedEx, a household shipping company name, was once down to its last $5,000 when its owner decided to risk it all.
NFTs and Their Downfall
The popularity of NFTs is said to have reached its peak in the late spring/early summer of 2022, marked by high-value transactions such as the sale of “Everydays: The First 5000 Days”. This NFT, created by famous artist Beeple, was sold at a private auction for a whopping $69.3 million US dollars, setting a worldwide record price for the sale of digital artwork. The sale attracted attention from a variety of tech moguls seeking the next big thing. The ensuing boom was widespread as the NFT market received an almost $27 billion increase in valuation while gaining the support of large corporations such as Meta and Apple, with Meta announcing its plans to allow users to mint and buy/sell NFTs on its respective platforms.
Kim Kardashian Launches Private Equity Fund
In September, Kim Kardashian, television star and social media influencer, announced the debut of private equity firm SKKY Partners in collaboration with longtime Carlyle veteran Jay Sammons. The move marks yet another entrepreneurial venture by Kardashian, whose clothing line SKIMS broke news in a January funding round valued at $3.2 billion. “Together we hope to leverage our complementary expertise to build the next generation Consumer & Media private equity firm,” Kardashian tweeted.
In this episode, hosts Rohan Gupta and Alex Patel continue their conversation with David Blood, a co-founder and senior partner of Generation Investment Management, about sustainable investing. We delve into topics like David’s sustainable investing framework, how he views shareholder activism, his thoughts on careers in the space, and much more!
Check out the episode to learn about sustainable investing in a simplified way!
“The three stages of a bull market: the first stage, when only a few unusually perceptive people believe things will get better, the second stage, when most investors realize that improvement is actually taking place, and the third stage, when everyone concludes things will get better forever.”— Howard Marks