Preview of the week starting 23Jan2023 - Can Microsoft continues her recovery?
Public Holidays (China, Hong Kong, Singapore & the US)
- 20 - 27 Jan 2023 Chinese Lunar New Year - China
- 20 - 24 Jan 2023 Chinese Lunar New Year - Singapore
- 20 - 25 Jan 2023 Chinese Lunar New Year - Hong Kong
In fact, most of the Chinese-speaking world will be closed to celebrate the Chinese Lunar New Year.
- Crude oil inventory has been showing bearish sentiments with lesser than expected drawdown. This is a forward indicator for consumption.
- GDP (QoQ - Q4) - this will be an essential outlook as the market expects a 2.6% increase. GDP is a good view of the economy.
- Initial Jobless Claims - this will be another important data point for the Fed as they plot out the interest rate hike.
- New Home Sales & Pending Home Sales (Dec) - This will be a good supplement to last week’s existing home sales, giving an understanding of how the real estate is coping in lieu of the climate of high-interest rates.
- Core PCE Price Index - to some, is the preferred way of looking at inflation.
Some of the Big Tech are sharing their earnings in the coming week. For this week, there are a few earnings of interest that include Microsoft & Tesla.
Microsoft has fallen 18.85% from a year ago. The P/E ratio stands at an attractive 25.79. It hit the 52-week low of 213.43 in Nov 2022 and has bounced off the lows recently. Will Microsoft be able to continue its recent rise?
For the coming earnings, the market has a forecast of 2.3 and 53.12B for its EPS and revenue accordingly.
News and my muse
- What are the costs, carbon footprint & value creation of the recent WEF / Davos2023?
- While innovation can give leverage, we need to understand the returns. While such investment may carve out an edge, a strong balance sheet can outlast the competition. A balance of both is the hallmark of strong business leaders.
- The balance sheet is how we compete. Same for business, same for countries.
- Big Tech layoffs have been announced. This is not the end and looks more like the start. Austerity can be the key to survival.
- In just the first week of January, the Eviction Lab at Princeton University has counted more than 9,300 eviction filings in the nine states and the 32 cities it monitors.
- When companies & individuals default, the financial sector takes a hit. For those who invest in "buy now pay later", a huge loss is possible if there is no due diligence for creditworthiness. This business may default before its customers.
- If the method & formula to measure inflation needs a refresh, is there a reason for the delay? What could be done to improve our corresponding mitigation?
- UK commercial property values fell more than 20% in the second half of 2022, MSCI data show. In the US, the drop was 9%, according to Green Street.
- Sundar Pichai, Google's CEO, said in an email sent to the company's staff Friday that the firm will lay off 12,000 employees.
- When the price trends downwards & the fundamental value trends upwards, the market is giving discounts. It is a time to be thankful. Don't be ungrateful.
- is it time to review financial accountability and due diligence? If this is a business, the removal of the top and senior management would not sound too harsh. Total debt: $31.4 trillion Annual interest paid on debt: ~$1.2 trillion by 2024. Annual tax revenue: $4.9 trillion Annual Deficit: $1.4 trillion Loss Projected 2023 Deficit: Over $2 trillion Maybe it is time to make a few changes before we run this into a brick wall.
- We can have a competitive relationship (with China) without making one an adversary - Jamie Dimon
- <CNBC> Dow futures fall more than 200 points on fears the Fed will overtighten after favourable jobless claims figure was reported.
- <GizChina> So far, Samsung has transferred a total of 179 patents to Huawei.
- <SCMP> A nationwide strike against pension reform in France led to a substantial fall in electricity output and halted deliveries from refineries operated by TotalEnergies on Thursday.
- <CNBC> Another round of layoffs begins at Amazon. In addition to the layoffs, Amazon has implemented a hiring freeze across its corporate workforce, slowed its warehouse expansion, and shuttered some experimental projects,
- <CNN> The population fell in 2022 to 1.411 billion, down some 850,000 people from the previous year, China's National Bureau of Statistics (NBS) announced.
- There can be components of content ownership, security, autonomy and regulations that would need to be ironed out. I hope that the government will work closely with the industry on this matter.
Market Outlook (S&P500)
Technical Observations for the 1D S&P500:
- Moving Average (MA):
- MA50 is on an uptrend (meaning bullish) in the midterm
- MA200 is on a downtrend (meaning bearish) in the long term.
- The candle has cut the MA50 line and is touching the MA200 line. This implies that it seems bullish in the midterm and still bearish for the long term.
- Exponential Moving Average (EMA):
- It is still a bullish trend.
- MACD - it is still trending upwards
- Stochastic - it is on a downtrend.
From the indicators above, there are mixed signals. Personally, we can expect the market to drop in the short term as I remain bearish for the longer timeframe.
My investing Muse
BigTech has started the year with a series of layoffs. Unfortunately, this could be closer to the start instead of the end. The coming earnings season will provide some insight into the outlook of the market. Beyond the revenue and EPS, the market outlook will also affect the price following the earnings. Let us monitor the outlook.
With the layoffs, it would lead to reduced spending. However, we can also see more starting their own businesses - choosing to be entrepreneurs than salaried staff. Hopefully, we can see more innovations and advances in the coming months.
If we have any underperforming stocks, it would be good to take profits or stop losses for these positions. Let us divert the funds to other assets with much better fundamentals. At the same time, we need to look out for businesses with weakening balance sheets. There were some businesses which surged during Covid without profits and more debts. In order for these companies to generate cash flow, they need to take on loans (at higher interest rates) or sell more shares in the market. Both are not good for the business and outlook. Should they accumulate more debt, these are red flags which will push these stocks into the “stop loss” pile. Personally, I may follow the technical indicators and cut my losses (or take profits) for such stocks.
Warnings have been sounded about the debt ceiling. While most have resigned to an eventual increase in the debt ceiling, the negotiations to get to this agreement can be tedious and painful. The US is expected to avoid a default on their payments but there is nothing guaranteed. This could cause much volatility in the market.
The US has an annual GDP of about USD$25 trillion. Thus, the payment of $1.2 trillion in interest (by 2024) can set the economy back significantly from various meaningful upgrades & revamp of policies. The practice of borrowing money from the future needs to stop. The government needs to spend within their means.
In lieu of these, I prefer to be monitoring the market this season. Not buying can also be a good trade. The coming GDP figure will be interesting and the earnings reveal much more about how the market is performing. Let us research before investing.
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