Oh Snap!

Market Scorecard

At a panel discussion last night hosted by the IMF, Jerome Powell strongly indicated that the Fed will raise rates by 50 basis points at their next meeting. The market is now pricing in three half-point rate rises for the next three policy meetings. As a result of the more 'hawkish' tone from the Fed, US equity markets erased their earlier gains to close in the red yesterday.

In company news, about 80% of US companies that have reported earnings so far have beat their estimates. American Airlines (NASDAQ:AAL) was one of them. The carrier reported revenue that more than doubled in the first quarter, pushing its shares up 3.8%.

At closing bell, the JSE All-share closed down 0.59%, the S&P 500 sank 1.48%, and the Nasdaq slipped 2.07%.

Michael's Musings

Should companies get involved in politics? The answer to that question 15 years ago was no. A company's sole purpose was to create value for shareholders. Since then, stakeholder theory has become more prominent.

Stakeholder theory says that shareholders are only one of many parties to consider. Parties like employees, customers, suppliers and the environment are all relevant when making decisions. Some companies, like Starbucks (NASDAQ:SBUX), have made caring for all stakeholders part of their corporate culture and image. The path has worked very well for them.

Disney (NYSE:DIS) recently made a complete mess of deciding where to take a stand. The company initially took a stance of mainly being agnostic to a controversial new law in Florida, but due to pressure from some employees, the company decided to voice its objection. The flip-flopping has resulted in the alienating of both employees and Florida politicians.

Due to the size of Disney's theme park in Florida, it is a special municipality zone. Having a special zone allows them to build and make changes to the land easily, but it means that Disney has to supply its own municipal services like providing fire fighters. A nice perk is that they can issue tax-free municipal bonds.

As retaliation to Disney taking a stand against the new law, Florida officials have made a lose-lose decision to revoke Disney's special municipal zone. Disney now has the frustration of needing extra approvals to make changes to their parks. However, the residents of Florida will inherit over $1 billion in municipal debt Disney raised for the zone.

Companies can no longer be agnostic to the world around them; they need to recreate their corporate identities and know their values. Creating a value system on the fly, based on the winds of social media, is one sure way to cause stakeholder confusion and reputation damage.

Bright's Banter

Snap Inc (NYSE:SNAP). released a good set of quarterly numbers, indicating an 18% growth in daily active users. The popular social media company among young people drew 332 million daily active users, beating estimates, and resulted in its shares gaining as much as 12% in extended trade.

Snapchat reported first-quarter revenues of $ 1.06 billion, up 38% year-on-year. The company echoed Facebook's (NASDAQ:FB) frustration with Apple's (NASDAQ:AAPL) new rules, making it tough for advertisers to measure and manage their ad campaigns. Let's see if Pinterest (NYSE:PINS), Twitter (NYSE:TWTR) and Alphabet (NASDAQ:GOOGL) will have anything to say on the matter as they all release their earnings sometime next week.

Google's Android operating system is introducing similar new rules too. The gatekeepers to our app stores hold all the keys to how we interact with other apps.

Signing Off

The MSCI Asia-Pacific is down about 1% to a one-month low, sapped by Hong Kong, Japan and South Korean markets. The statement from the Chinese security watchdog urging institutional investors to buy more domestic shares didn't do much for Shanghai markets either.

US equity futures are also in the red in early trade, suggesting that we might extend those weekly losses. The Rand is trading at R15.40 to the US Dollar, as the greenback continues its aggressive climb.

The weekend is here, happy Friday!

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