Wall Street drops as AI worries pummel chipmakers
Market Scorecard
US markets rallied yesterday after more evidence that inflation is indeed cooling. Services and supplier prices softened, suggesting that the Fed should get off its high horse soon. The market gains were broad-based, with nine of the S&P 500's 11 sectors in the green, and consumer and technology stocks leading the charge.
In company news, Walmart (NYSE:WMT) closed up 6.5% after reporting surprisingly strong sales and raising its profit guidance for the year ahead. Elsewhere, TSMC (BVMF:TSMC34) popped 11% after the news that Berkshire Hathaway (NYSE:BRKa) had accumulated a $5.1 billion stake in the chipmaker.
In summary, the JSE All-share was up 0.24%, the S&P 500 gained 0.87%, and the Nasdaq was 1.45% higher.
One Thing, From Paul
Vestact clients are having a tough year. Despite some recent gains, our model New York portfolio is still down 29% in 2022.
We were heartened by the release of the October US inflation numbers last week, because that was the first CPI read to come in lower than expected. We believe that the Fed will soon signal that it's "done enough" and stop hiking interest rates. Let's hope that we are right.
There's a wall of cash on the side-lines because for the last six months, most US-based fund managers have been avoiding equities and buying bonds. They manage way more money than we do.
A few good days do not mean we can relax. As James Clear says, "You never have it licked. Making good choices is an endless process. Many areas of life that we value most - our relationships, our fitness, our craft - require a continual commitment".
Byron's Beats
Here's another Charlie Bilello gem which dovetails well with Michael's piece from yesterday. The graph below plots a ratio of the S&P 500 to the MSCI rest of the world index. The ratio started at 1:1 in 1969. It now sits at 4.8 times in favour of the US as of October this year, an all-time high.
The big outperformance of the US market starts after the subprime mortgage explosion in 2008-09. Ben Bernanke and his team jumped to the rescue quicker than their counterparts in Europe.
The US is far from perfect but they remain the most business-friendly jurisdiction in the world and the best place to invest your money.
Michael's Musings
Elon Musk, and society in general, are still trying to find the balance between free speech and regulation on social media platforms. How do you stop the spreading of fake news without limiting people's right to speech? It seems that the freer a platform is, the more toxic it becomes, but having too much censorship isn't the solution.
To try to limit the spread of lies and impersonation, Twitter introduced a blue tick next to a prominent person's name, validating that the account belongs to the name stated on the account. With time, the blue tick became a status symbol because it showed that you were relevant enough to be verified. To boost Twitter's revenue, Musk will now sell blue ticks for $8 a month.
Last week someone created a fake account, bought a blue tick and impersonated pharma giant Eli Lilly (NYSE:LLY). They tweeted that insulin is now free - a drug which generates significant profits for Eli Lilly. Immediately after the tweet, the Eli Lilly share price dropped over 6%. Twitter has now suspended their $8 a month blue tick service.
Unfortunately for Eli Lilly, it rekindled the argument about US drug prices. The RAND Corporation found the average price for a vial of insulin is $12 in Canada, compared to about $99 in the US.
Bright's Banter
Do you ever feel like the world is getting more crowded? That's because it is.
According to projections from the United Nations, the world's population crossed the magical 8 billion mark yesterday, representing a milestone in human development before birth rates start to slow. Over 1 billion people have been added to the global population in just 12 years. I blame the likes of Elon Musk and Nick Cannon!
"This unprecedented growth is due to the gradual increase in human lifespan owing to improvements in public health, nutrition, personal hygiene and medicine. It is also the result of high and persistent levels of fertility in some countries." the UN statement read.
Here's how the population has grown in the last century:
1925 - 2 billion (rookie numbers)
1974 - 4 billion (we're getting there)
2022 - 8 billion (ok guys, let's slow it down)
Signing Off
Asian markets whipsawed overnight, as news broke of a rocket strike inside the Polish border. Will NATO respond? Comments from Joe Biden suggested that the missile was unlikely to have been fired from Russia. Huh? Shares in Hong Kong and mainland China fell, while Japan was little changed.
Some key events to look out for today are Nvidia (NASDAQ:NVDA), Cisco (NASDAQ:CSCO) and Target's (NYSE:TGT) results, as well as economic data about US business inventories, cross-border investment, retail sales, and industrial production. The media will probably be obsessing about Donald Trump's announcement that he will run for the US Presidency for the third time, in 2024.
US equity futures are slightly in the green, holding on to recent gains. The Rand is trading at R17.35 to the US Dollar.
NASA is scheduled to launch its twice-delayed Artemis test mission to travel around the moon this morning. Let's hope that they finally have a good day.
