Market scorecard
Jerome Powell sounded a little hawkish yesterday, so the US market settled lower. Investors seem to be rethinking the bullish spirits unleashed by last week's Fed rates pause. Health insurers were a bright spot, but chipmakers sagged. AMD (NASDAQ:AMD), Intel (NASDAQ:INTC) and Qualcomm (NASDAQ:QCOM) were down 5.7%, 6.0%, and 3.4%, respectively. Our holding in the sector, Nvidia (NASDAQ:NVDA), only lost 1.7%.
In company news, investment giant BlackRock filed paperwork with the SEC to set up a spot Bitcoin ETF. The price of Bitcoin rallied to $30 000 on the news. Locally, Vodacom finally launched eSIMs last week, nine months after the Apple (NASDAQ:AAPL) announcement. These eSIMs allow users to switch networks without needing to swap out a SIM card, or buying a phone with two slots.
In another positive development for consumers, South Africa's inflation came in at 6.3%, better than forecast and the lowest in 13 months. Hopefully, it means that the SARB is done hiking interest rates.
At the end of the trading day, the JSE All-share closed down 1.48%, the S&P 500 fell 0.52%, and the Nasdaq slumped by 1.21%. Sorry.
One thing, from Paul
It's a mistake to assume that trends will always continue into the future, as they have done in the past. This is why one has to stay alert, and make the odd change to your investment portfolio.
Here's a good example of someone making an assumption that a current trend will continue forever. It's from a report by the World Economic Forum (WEF) about the gender gap.
"The WEF estimates that women won't attain parity with men for another 131 years. In other words, not until 2154. The overall gender gap - a measurement of equality across the realms of the economy, politics, health and education - closed by a mere 0.3% as compared to last year".
That update was intended to be eye catching, and is both sad and a slightly silly assumption. I'd guess that the gender gap will close a lot sooner than that. The cartoon below makes the same point, that rates of change do change.
Byron's beats
According to the International Energy Agency, worldwide investment in solar energy will soon overtake that in oil production. They forecast capital expenditure of $380 billion on oil production projects in 2023, while $390 billion will be ploughed into solar energy assets.
Just 10 years ago that comparison was hugely different. Back then in 2013, $620 billion was invested in oil production versus a meagre $120 billion on solar. We are living through a very exciting energy revolution.
Michael's musings
South Africa has problems, but at least we don't have inflation of 114% like in Argentina. Due to political instability and wonky economic ideas, that country seems to go from crisis to crisis. Despite all of those issues, their economy still chugs along. It is an encouraging sign for us in South Africa that life does go on, even with economic problems.
A recent New York Times article took a look at how people cope in an environment where prices just keep going up. Interestingly, Argentina's restaurant industry is thriving because a pay cheque is worth less at the end of the month, so people flock to spend money as quickly as they earn it. With uncertainty around the future, the culture has also shifted from saving to spending.
The general lesson from imploding economies is that productive assets are a store of value. They probably won't grow much in real terms, but at least they protect you against a rapidly deteriorating currency. In the NYT article, many restaurateurs in Buenos Aires were ploughing their fresh funds into new establishments as a way of saving.
Inflation leads to a weak currency, and the Argentine Peso has collapsed. My advice is to ensure you have savings outside of South Africa. We are less than 1% of the global economy, it doesn't make sense to have 100% of your assets in Rands.
For those interested, here is the article (requires a subscription) - Inflation passes 100% and the restaurants are packed.
Bright's banter
Chinese EV maker Nio (NYSE:NIO) has just landed a cool $738.5 million in fresh capital from Abu Dhabi government-owned fund CYVN Holdings. The fund will now hold a 7% stake in Nio. The deal was priced at $8.72 per share, slightly below Nio's closing price on Tuesday.
Nio has been facing some challenges lately, with sluggish car deliveries affecting cash flow and causing delays in certain projects. However, the company assures investors that it has enough money to keep the business running smoothly.
The agreement with CYVN is set to be finalised in early July, opening up new international opportunities for Nio. As part of the deal, CYVN will nominate a director to Nio's board.
This investment highlights the growing interest of Middle East investors in China's electric car market and provides the Chinese electric car company with a solid financial boost and some strategic advantages.
Signing off
Asian markets are mostly higher this morning with the MSCI Asia-Pacific index headed for its first green day this week. A half a percent rise for Japan's Topix index added to a string of gains that have taken that benchmark to the highest level since 1990. Stocks in South Korea also ticked higher, while markets are closed in Hong Kong and mainland China, for the annual Dragon Boat festival.
Inflation remained at 8.7% in the UK, higher than expected for a fourth month. This could force the Bank of England to accelerate the pace of rate hikes by an additional 25 basis points to 4.75% today. We were joking in in the office yesterday that they should join the EU to try and fix these problems.
US equity futures edged lower in early trade. The Rand is trading at R18.36 to the US Dollar.
Indian Prime Minister Narendra Modi is enjoying a state visit in Washington DC, and will address the US Congress and enjoy a banquet dinner at the White House. Enjoy your dinner tonight, eating in good company is one of life's great pleasures.