To The Moon

Third time is not the charm with the Fed raising interest rate by yet another 75bps last night, sending markets whipsawing lower with S&P down 1.7% and Nasdaq down 1.8%.

The Fed’s signaled its resolve to bring inflation down which implies that this may not be the last time we witness jumbo rate hikes heading into the last two policy meetings of the year and projections are that we may see Fed Fund rate to end the year at 4.25%-4.50%.

Equity market rose in volatility with higher beta cyclical sectors such as consumer discretionary, communication services and materials sector leading decline in the market.

The dollar surged to new highs against a basket of key currencies; the Yen in particularly have hit fresh lows as Bank of Japan bucks the trend of other central banks as it maintained negative interest rates.

European equities were surprisingly resilient up by 0.7% yesterday. Bank of England is also expected to follow the Fed’s footstep in its rate hike action by 50bps to 75bps in its Thursday meeting.

Oil prices were firm after Russia announced mobilization of additional troops and raised nuclear threats, which sparked worries on potential escalation in the ongoing conflict that have lasted for about seven months.

$NVIDIA Corp(NVDA)$  bucked the trend against the market fall, as Jensen Huang gave an upbeat view about the China market’s growth opportunities despite recent US government restriction of exports of its high end A100 and H100 artificial intelligence chip, a space which Nvidia has a commanding share of the market. This is expected to result in a $400m decline in sales for the quarter which the company is working with China to mitigate the risks with alternatives. Despite concerns of weak demand and fallings GPU prices with a miss in 2Q, Nvidia’s new line of Ada Lovelace pricing has been unexpectedly higher than its predecessor, with a “monumental” boost to performance according to Nvidia. Nvidia has fallen by some 55% YTD, and it remains to be seen whether current valuations amid the new product cycle will hold with curtailment in consumer and enterprise spending. Nvidia trades at 38.2x/29.4x of FY23/24 consensus PE ratio.

$Coty(COTY)$  is revitalizing its brand with skincare ranges with brands such as Lancaster, Orveda, Philosophy, SKKN and Kylie focused on research and emphasis on digital marketing. It is optimistic to double its skincare segment sales towards $500-600m by FY25. Coty is seeing broad-based growth for its prestige and consumer beauty products across Europe, America, and Global Travel channels. As a group the company is looking at sales growth of 6% to 8% for FY23-25 and EPS growth of 20%. Despite higher costs, Coty have defended margins with price increase and premiumization, especially with normalization of covid in Asia Pacific. Amid improving concerns of its leverage profile, Coty trades at 24.9x/20.3x of FY23/24 consensus PE ratio.