To The Moon

My Investing Muse (15Jul24)

Layoffs & Closure news

• Texas supply chain-related firms hit with 285 layoffs Packaging provider closes Houston plant; food supplier closes Dallas facility - FreightWaves

• Unilever plans to cut a third of all office roles in Europe by the end of 2025 under CEO's strategy to boost growth, with as many as 3,200 positions to be eliminated. - Economic Times

• ike has laid off about 20% of employees who worked primarily on its sustainability initiatives, The Oregonian/OregonLive and ProPublica found. Roughly another 10% left voluntarily or were transferred to other jobs. - Fast Company

• Vacuum cleaner manufacturer Dyson is planning to cut one-third of its workforce in the UK over the quarter as a part of global restructuring. - Live Mint

• Software developer UiPath will cut 10% of its workforce, or about 420 jobs, as part of a broader company restructuring. UiPath shares fell 7% on Tuesday and have plunged more than 50% year-to-date. - CNBC

• PricewaterhouseCoopers LLP is cutting staff across its China operations, according to people familiar with the matter, after an exodus of corporate clients diminished the accounting firm’s revenue prospects in the country - The Edge Singapore

• CNN quietly disbands Race and Equality team as part of layoffs - New York Poists

• More than 1,000 of the employees being cut “are not meeting expectations". - Times of India

• NATO officially announced it will send F-16 fighter jets to Ukraine for its war against Russia. Russian President Putin previously said F-16 fighter jets are legitimate targets for Moscow, even on third-country airfields. Putin also said if NATO sends F-16 fighter jets to Ukraine, it is an escalation of Russian rhetoric that could potentially lead to a war. Is NATO now at war with Russia? - BRICS News

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The construction industry saw 4,613 layoff announcements in June, the most since the 2008 Financial Crisis. This jump was even higher than the ~4,200 job cut announcements in the 2020 Pandemic. Layoff announcements surged by 20% year-over-year last month, the largest increase since September 2023. Meanwhile, 1.858 million Americans are now receiving jobless benefits, the most since 2021. The US labor market is weaker than it seems. - X user The Kobeissi Letter

Layoff & closure news continued into the week.

Jobs Data

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Jobs report numbers have been revised DOWN in 4 out of 5 months of 2024. The largest revision from 353,000 to 256,000, or by 97,000 took place in January. Subsequently, February saw a -39,000 downward adjustment. April and May were revised down by 67,000 and 54,000, respectively, or a total of 111,000 jobs. In the first 5 months of 2024, non-farm payrolls have been revised down by a combined 240,000 jobs. Is the initial headline number even worth following anymore? - X user, The Kobeissi Letter

From the revision of the job data, the economy seems to be doing weaker than it looks (despite the recent push in the S&P 500).

S&P500 Q2 earnings outlook

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67 $SPX companies have issued negative EPS guidance for Q2 2024, which is above the 5-year average of 58 and above the 10-year average of 62. - FactSet

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The trailing 12-month P/E ratio for $SPX of 26.4 is above the 5-year average (23.4) and above the 10-year average (21.5). - FactSet

I have plotted the S&P 500 line (Pink line) on top of the S&P 500 Equal Weight Index. This shows how a few companies (especially the Magnificent 7) with heavier weight pulled up the S&P500.

This is an aged chart but this reveals that in 2023 (January to November), the Mag7 is driving most of the growth with the rest of 493 moving sideways.

My final thoughts

The biggest news of the week would be the assassination attempt on presidential candidate Donald Trump. Its failure is likely to stir reaction from all parties. It would be interesting to see how the market will react to this news. President Biden and his team have come out strongly to condemn this act mentioning that there is no room for such X in America. Will this spark any response from more aggressive groups?

In the coming week, we will see the beginning of the quarter to earnings of 2024. Different sources have made various predictions. With the latest CPI data, there is momentum in the market expecting a cut in the interest rate. The PPI data that was released on Friday was concerning as this implied some inflationary pressures in the coming weeks.

The earnings of the last quarter would help to bring more understanding about the market and the economy. It would not be surprising that the magnificent 7 will play a big role in how the various indices will perform in the coming quarter. This raised an important consideration. The indices would reflect the performance of the magnificent 7 more than the performance of the rest of the 493 in the S&P 500. Let us consider monitoring the rest of the market so that we can get a more realistic feel for how the economy is doing.

How do we feel about the economy? How is the cost of living affecting typical citizens? This will speak louder than the data that the government is presenting. The average data does not always represent the typical citizen. It is a mix of the best and the worst and the distribution is unlikely to be balanced. Let us consider hedging in the coming weeks as we anticipate more headwinds, especially with the attention involving NATO, Ukraine and Russia. China's foreign affairs agency has spoken out against American practices. They are room for volatility and Black Swan events.

@TigerStars

$S&P 500(.SPX)$