To The Moon

Public Holidays

Singapore celebrates Hari Raya Haji with our Muslim citizens on 17 June 2024.

Hari Raya Haji 2024 / Tarikh Cuti Sekolah KPM Sempena Aidiladha

America celebrates Juneteenth on 19 June 2024.

China and Hong Kong do not have public holidays in the coming week.

Economic Calendar (17Jun24)

Notable Highlights

• For core retail sales and retail sales the market is expecting growth of 0.2% and 0.3% respectively. This is an important reference as retail accounts for about 8% of America's GDP.

• Philadelphia manufacturing index will shed insight on how the manufacturing sector is doing. S&P global US manufacturing PMI sheds light on this manufacturing sector. A reading of above 50 is seen as expansion or growth.

• S&P Global Services PMI reveals the demand for services.

• Existing home sales will cast a light on the real estate market.

• Initial jobless claims will also be key macro data that the Federal Reserve will look into as they ponder the next interest rate decision.

• Crude Oil Inventories can be seen as forward indicators of market demand and consumption. If the trend of excess inventories continues, demand erosion can lead to reduced production & weakening consumer spending.

Earnings Calendar (17Jun24)

The interesting earnings for the coming week are Accenture, Jabil and FactSet.

Let us look at FactSet. Who is Factset (taken from QuickFS)?

FactSet Research Systems Inc., a financial data company, provides integrated financial information and analytical applications to the investment community in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. The company delivers insight and information through the workflow solutions of research, analytics and trading, content and technology solutions, and wealth. It serves portfolio managers, investment banks, asset managers, wealth advisors, corporate clients, and other financial services entities. FactSet Research Systems Inc. was founded in 1978 and is headquartered in Norwalk, Connecticut.

Investing recommends a “Strong Sell” rating. The price is currently on a downtrend, having fallen 4.87% from a year ago.

Observations about FACTSET:

• Revenue grew from $920 million in 2014 to $2.08 billion in 2023, a doubling of revenue over 10 years.

• Operating profit grew from $302 million in 2014 to $655 million in 2023.

• The earnings per share grew from $4.92 in 2014 to $12.04 in 2023.

• The gross profit 10-year median margin stands at a good 53.5%.

• The price-earning P/E ratio stands at 31.4.

• The 10-year median margin for free cash flow (FCF) stands at a strong 26.6%

The forecast of FactSet’s coming earnings is $3.90 for EPS and $552.78M for revenue.

Will FactSet be able to beat the earnings and reverse the decline?

Market Outlook of S&P500 - 17Jun24

Observations:

• The MACD indicator is on an uptrend. A double top is forming and we should expect a reversal in the coming days.

• Chaikin Money Flow (CMF) has crossed the zero line in the middle which implies an uptrend. Yet, there is a stronger buying momentum than a selling one. Let us monitor the development in the coming days. This should peak in the coming days.

• Moving Averages (MA). Both the MA50 line and the MA200 line are on an uptrend. The last candle is above both the MA 50 line and the MA 200 line. Thus, it could be read as bullish for the long term and the mid-term.

• Exponential Moving Averages (EMA). The 3 EMA lines are on an uptrend.

• I have replaced Stochastic with CMF to incorporate consideration of volume. Stochastic and MACD are similar with Stochastic being “more active” and more capable for “false” signals.

Based on the 1D interval, Investing has recommended a “Strong Buy” rating. There are a total of 20 technical indicators that point to a “Buy” status and there are none for a “Sell” status.

From the data above, we can expect the S&P500 index to continue its uptrend. A “Double Top” is forming and this implies a coming reversal. Let us monitor this closely.

News and my thoughts from the last week (17Jun24)

• Malls need to pivot towards experience and not just retail sales. E-commerce could be a superior alternative coming to sales.

• 2 advantages that we need to consider from digital connectivity are the ability to outsource and crowdsource.

• The Federal Reserve’s roughly $1 trillion pile of paper losses stemming from its underwater securities holdings have begun to turn into more than $100 billion in actual losses, with no relief in sight. - Yahoo Finance

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X User KobeissiLetter:

The Magnificent 7's share of the S&P 500 just hit another all-time high of 32%. This is 12 percentage points higher than at the beginning of 2023. The weight of these 7 stocks in the index has almost DOUBLED in just over 4 years. This comes as the 3 largest stocks, Apple, Microsoft, and Nvidia, are all officially worth over $3 trillion. Meanwhile, the technology sector just hit another all-time high relative to the S&P 500. Tech is becoming even more dominant.

It is not surprising to see the dominance. They are in a prime position to influence the market. The market and indices can surge or drop in reasonable magnitude thanks to the Magnificent 7.

• New US sanctions against Russia have caused an immediate suspension of trading in dollars and euros on the country’s leading financial marketplace, the Moscow Exchange. - CNN

• Far East to U.S. ocean freight rates are up between 36%-41% month over month, while air freight prices have jumped 9% this year. DHL says ocean freight rate inflation could see rates reaching between $20,000 and a Covid era peak of $30,000. - CNBC

• 𝗦𝗮𝘂𝗱𝗶 𝗔𝗿𝗮𝗯𝗶𝗮 𝗗𝗶𝘁𝗰𝗵𝗲𝘀 𝗨𝗦 𝗗𝗼𝗹𝗹𝗮𝗿 Saudi Arabia will not be renewing the 50-year petrodollar agreement with the United States. Instead, they will be selling oil in multiple currencies, including the Chinese RMB, Euros, Yen, and Yuan. This should be treated as a black swan event, but you wouldn't know it because the U.S. government is more focused on investigating tyre tracks over an LGBTQ street intersection. Remember, the revolution will not be televised. - X user Shadow of Eza.

Saudi Arabia is not the first and would not be the last to steer away from USD. The debt of the US is putting its economy and the rest of the world at risk. This is the greater concern. The debt has a chance to bring all down.

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• @KobeissiLetter

  JUST IN: US consumer credit jumped by $6.4 billion to a record $5.05 trillion in April. Credit card debt was roughly unchanged at all-time highs of $1.34 trillion. In just 3 years, credit card debt has surged by $368 billion, or 38%. Meanwhile, credit card debt serious delinquency rates of 90+ days have are up to 6.9%, the highest in 13 years. This comes as interest rates on credit card debt have risen from 15% to 25% in just 3 years. What's going to happen with all of this credit card debt?

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Cell phone activity is going down in every major downtown area in the US. This impacts the local retail, public services and real estate. Where has the spending gone to?

• the failure of fiat currencies would propel the demand for other alternative assets. Cryptocurrencies and gold could be the beneficiaries.

• The shipping industry in Athens anticipates higher earnings amidst geopolitical conflicts and supply uncertainties. - Economic Times

• The price of shipping has reached an 18-month high - threatening to impact the falling inflation rate. - Sky News

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X user @KobeissiLetter -

The US government is spending as if we are in a crisis: US government expenditures as % of GDP just hit 43%, matching levels seen during the 2008 Financial Crisis. To put this into perspective, spending as a % of GDP is just 1% below World War 2 levels. Even at the peak of World War 1, US government spending as a % of GDP was 20 percentage points LOWER. Meanwhile, the Fed continues to call for a soft landing and economic data is "strong."

• All innovations need to toll the line of privacy, governance and ethics. The biggest benefactor of this could be $MSFT who have access to the data. If we are not paying, we ARE the product, aka the user.

• Will the gains made by AI be adequate to cover the losses incurred by debts?

• Microsoft, Apple, and Nvidia are each worth a little more than $3 trillion. As a result, this trio now makes up more than 20% of the entire $44.4 trillion market value of the S&P 500.

My Investing Muse (17Jun24)

Layoffs & Closure news

• KPMG Australia will overhaul its consulting business to focus on tech-related advisory and software installation as part of an $80 million cost-cutting exercise that will include shedding about 200 jobs. - AFR

• FedEx to cut up to 2,000 back-office jobs in Europe amid weak freight demand - CNBC

• Coach USA filed for Chapter 11 bankruptcy protection on June 11 according to a petition filed in Wilmington, Del. Coach USA owes creditors between $100 and $500 million - The Street

• Bytedance to Lay Off 450 Employees in Indonesia After Merger with Tokopedia - Jakarta Globe

Layoff news continued into the week.

Cost of disasters

Between 2010 and 2020, tornadoes have cost an average of $2.5 million per storm. The most expensive tornado of all time occurred on May 22, 2011 in Joplin, costing $2.8 billion in insurance claims & a total damages around $3.18 billion. - Water Street Company

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May tornadoes, derecho storm push weather damages past $25 billion so far this year - CBS News

2024 Hurricane Season Is Expected to Be Abnormally Busy, NOAA Predicts The Atlantic hurricane season is looking to be an extraordinary one, with 17 to 25 named storms predicted. What is the impact to people, property, livelihood & insurance? - NY Times.

Let us monitor this. Extreme weather is expected to continue and now, America is expecting up to 25 named hurricanes heading their way. These are adding burden to the citizens - increased costs of insurance premium, re-construction, medical, livelihood and more. Would the insurance sector be affected? With over $25 billion worth of damages, the insurance is expected put the costs back to the customers with increased premiums.

How is the insurance industry coping? The official hurricane season has yet to start as it typically starts in August for 3 months.

Profitable businesses

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X user KobeissiLetter:

42% of US small-cap companies are unprofitable, the most since the 2020 pandemic when 53% of small caps were losing money. At the same time, only 10% of the S&P 500 firms and 20% of mid-caps are unprofitable. By comparison, during the 2008 Financial crisis, 46% of small-cap companies were unprofitable compared to 29% of the S&P 500. This helps explain why the Russell 2000 index has not reached a new all-time high for 647 days straight, the longest streak since 2011. The index is now trading ~21% below its peak as elevated interest rates have weighed small caps. Small-caps companies are struggling.

Despite 42% of US small-cap companies being unprofitable, the mid and large-cap companies are doing much better. The lack of profits may drive businesses to take on debts. Let us monitor the debts that companies are taking on.

My final thoughts

The war in Ukraine and Gaza is draining American resources. Some are feeling the strain as more would appreciate the proposition to put citizens first. Add the extreme weather, a bird flu pandemic and other geopolitical tensions, all these would have an inflationary impact.

Let us consider hedging, avoid leverage and research before investing.

@TigerStars

$FactSet Research(FDS)$

$Jabil Circuit(JBL)$

$S&P 500(.SPX)$