In falling market, META, AMZN, GOOG +++ which to Buy?
US Market Earthquake?
Only 2 weeks into 2024 and already the US market is shakier than ever.
What have caused the market to become so volatile over the past month — 13 Dec 2023 to 12 Jan 2024?
4 Main Factors.
(1) FOMC Dec 2023 meeting.
On FOMC’s last meeting in 2023, the Fed team decided to:
Keep Fed Funds rate static & unchanged.
Acknowledged that the Fed’s policies are working to cool down the US economy.
Cut interest rate in 2024.
This caused the market to rally.
(2) Santa rally.
The santa proved to be short-lived because all too soon, the Fed officials were out in force interacting with the media to dampen the euphoria that resulted from the FOMC press conference.
This caused the santa rally to spluttered and died a natural death.
(3) Inflation.
This began to take centrestage as a result of the Fed’s hawkish stance and the death of santa rally.
It did not help that US’s December 2023 consumer price index (CPI) soar by +0.3% to 3.4%, surpassing (a) Wall Street analysts’ 3.2% estimates and (b) November 3.1% CPI data.
With more inflation-related reports due soon, this element will continue to haunt the US market, like it or not.
(4) Spot Bitcoin ETFs.
The final nail to the coffin must have been the debut of Spot Bitcoin ETFs, after a 10-year battle between funds houses and the SEC; with the latter bowing under pressure after being berated by the Court for consistent inconsistency.
Apparently, the Bitcoin ETFs (issued by the 11 approved institutions) have mopped up $4 Billions of resources that would have bound for the US market, had the ETF not been approved.
Strangely enough, the Spot Bitcoin ETFs launched did not have a positive effect on:
Bitcoin. (see above). Lost -5.47% for the past 30 days.
Bitcoin mining stocks eg. $MARA (-23.34%) or $RIOT (-22.37%). Both fell for the past 5 days.
Crypto platform eg. $COIN (-17.24%). The US stock fell as well for the past 5 days.
(5) Quarterly earnings Season.
Mega cap companies, led by the Financial institutions have began their Q4 2023 earnings reporting. So far, it has been a mixed bag of results and so have been the market’s performance.
This will persist until all companies have reported their final earnings and officially close off financial year 2023.
When market is “directionless” (like now), I will refer to the Famous Five a.k.a the FAANG stocks and see how they fare.
The combined weight of the FAANG stocks in major indexes like the S&P 500 is very closed to 20% (as of end Nov 2023).
As such, their influence can be amplified due to their volatility and investor attention.
Strong performance from the FAANGs can lift the indexes, and vice versa.
Still FAANG-tastic ?
What do you think ?
Above is the FAANG stocks performance for the past calendar month, 13 Dec 2023 to 12 Jan 2024.
At a glance, it is obvious which stock is ahead of others and which is languishing. (see above).
FAANG stocks’ performances:
$Meta Platforms, Inc.(META)$: +11.87% (+$39.75 to $374.49).
$Alphabet(GOOG)$. +7.67% (+10.27 to $144.24).
$Amazon.com(AMZN)$: +3.88% (+$5.78 to $154.62).
$Netflix(NFLX)$: +2.54% (+$12.18 to $492.16).
$Apple(AAPL)$. -6.08% (-$12.04 to $185.92).
FAANG - Bull or Bear?
Heading into the final 2½ weeks of January 2024, what are the headwinds facing the FAANG?
(1) Meta Platform.
US tech stock, Meta is in “fire” mode again, this early on in 2024.
Instagram's job cuts point to Meta's efforts to:
Adapt to changing market conditions.
Prioritize internal efficiencies.
While it raises some concerns, it's important to keep the bigger picture in mind and wait for further developments to understand the full implications for Meta and Instagram.
Funnily enough, US stock market “loves” costs cutting news just so expenses are kept to a minimum.
Should be a “no fuss” quick fix to address the non-compliance issue, pay the fine and quickly get on with life.
Not unless, losing this anti-trust regulatory may results in Stateside fallout, then it becomes a pressing issue on hand, to be handled with tact.
Overall verdict - A stormy weather ahead?
(2) Amazon Inc.
Joining in the “Fire” mode, is Amazon Inc.
The world’s “Best online retailer” is in the process of right-sizing various departments eg. Audible division, Prime Video and Amazon MGM Studio.
Overall verdict - it will be business as usual, even after workforce trimmed.
(3) Apple Inc.
Will it be a question of time before Apple decides an out-of-court settlement with Masimo over the “infringement” of patents on the use of Masimo’s oximetry technology in Apple’s Watch?
Will the tech giant taps its legal-eagle resources to the maximum and tries to bulldoze and hopefully bury Masimo in the legal process?
The longer the lawsuit drags, the worst it will be for Apple the “brand” equity and the stock. There will be a consequential price to be paid, should Apple lose the lawsuit.
Whenever there is regulatory or security issue, it is never “good” news.
European Union (EU)’s aim to allow the distribution of apps outside its proprietary AppStore, and ongoing competition cases involving Apple’s music streaming service Apple Music will have a direct hit on Apple’s exclusivity image it has maintained for the longest time; not to mention the lucrative revenue generated from both apps and music transactions.
Overall verdict - watch closely its development for it may hurt the stock price.
(4) Netflix.
For online content providers with nary a shopfront, membership subscriptions become the most important success criterion for Wall Street analysts to grade Netflix.
Crackdown on “shared” account, an issue that has dogged Netflix for the longest time, was its golden ticket out of doldrum. That was all in the past.
With the end of 2023 Writers' Strike in September, production costs have increased due to the minimum wage negotiation.
At the same time, revenue reduced due to new & improved streaming residuals.
To pass the buck along, Netflix (and I am sure other content providers as well) have Hobson’s choice but to increase subscription fees.
However, it was faced with accounts termination repercussion and in the process, analysts downgraded Netflix.
Overall verdict - Netflix needs to dig deep to find a solution to (a) win back the lost customers and (b) find new ones fast!. The 2% gain may not lasts too long.
(5) Google Inc.
The Google adtech antitrust case is a complex legal saga, involving the European Union (EU) accusing Google of abusing its dominant position in the online advertising technology (adtech) market.
The EU regulator does not like Google’s practices of :
Favoring its own ad exchange and ad tech tools over competitors in auctions and bidding processes.
Striking deals with website owners and other stakeholders that restrict their ability to work with Google's competitors.
Leveraging its vast user data to gain an unfair competitive advantage in ad targeting and pricing.
If I am Google, I will also fight tooth and nail with all my available legal resources. It is not personal, its just business, right!
Just this January, Waymo’s certified Level 4 (of 6 levels) autonomous driving robotaxis, will be tested on Arizona, Phoenix's highways — a first for the autonomous vehicle company.
This is in addition to Waymo driverless robotaxis operating in San Francisco since August 2023.
Incidentally, Waymo is the only company with a Level 4 certification for autonomous driving.
Tesla incidentally is still at Level 2 for the longest time, confirming that Tesla is just a technically advanced EV maker, no more no less.
Overall verdict - Google’s antitrust challenges will be a long drawn battle. It will have to muster all its resources to ensure that it does not lose the lawsuiit and its technical advantage.
Its leadership in autonomous driving proves that this is a Tech giant where failure is not an option.
My viewpoints: (mine & mine only)
Meta Platform: If this social media app company plays its cards right, it might just remain in its pole position in 2024. Just do not go back to the Metaverse! Stay the AI-course.
Amazon: Confident that it will remain in the Top 3 spot - no matter what. Its Amazon Web Services (AWS) has a lot of in the AI-race; not forgetting its AI-chip in the making.
Apple Inc. Having just been edged out the #1 Most valuable public company (by Microsoft) and the (more serious) headwinds its facing, 2024 will be a “memorable” year to get through.
Netflix: I will not be surprised if Netflix ends up in the 5th position by year end. To grow organically in a mature market is so challenging; not to mention rising costs of production.
Google: If there is any company that could topple Meta’s #1 position, it could only be this IT giant.
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Great article ! Buy all