U.S. stock futures mixed with key inflation data ahead
Market Scorecard
US markets rose for the third straight session yesterday. This was after Fed meeting minutes were released, indicating that they remain focused on wrestling inflation back down to acceptable levels. Oil prices moved lower, taking energy stocks down 1.7%.
Data released yesterday showed that US job openings dipped slightly in May but remained near a record high. Notwithstanding all the chatter about an economic slowdown in the US, companies are hanging on to their current employees and trying to find more. That's a good sign.
In corporate news, Samsung Electronics (KS:005930) expects operating profits to rise 11.4% for the second quarter, despite ongoing supply chain constraints. Elsewhere, Coinbase (NASDAQ:COIN) flopped by another 6.7% after a rival exchange FTX put forward a proposal to regulators that would allow crypto investors to bypass brokers. Crypto markets are a circus!
Yesterday, the JSE All-share closed up 1.15%, the S&P 500 climbed 0.36%, and the Nasdaq rose 0.35%.
One Thing, From Paul
Are you worried about the United States of America? Is it going off the rails? This is an issue for us, since our investments are held there, in US-domiciled companies, in US Dollars.
Here are some concerns about the US that I've heard this year. (1) high levels of gun violence, (2) viciously partisan politics, (3) woke culture undermining academic institutions, (4) excessive public spending on cash handouts, (5) under-investment in infrastructure, (6) right-leaning Supreme Court upending women's rights, and (7) Republicans disrespecting election results.
These are all valid worries. Depending on your political persuasion, you might see some as more serious than others.
However, the US has many strengths that make its economy very vibrant. Here are some: (1) respect for the rule of law, (2) large and well-educated population, (3) vast land and natural resources, (4) multicultural people, (5) top scientific institutions, (6) lower taxes and less regulation on business, and most importantly (7) world-class companies and a strong culture of innovation.
I'd say that on balance, the US's large companies are still the best investments on the planet.
Michael's Musings
The growth in cloud computing has been a boon for the three major players - Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT) and Google (NASDAQ:GOOGL). They account for 65% of this $53 billion global market, up from 52% four years ago. This industry continues to grow rapidly, up 30% in 2021 and around 30% again in 2022.
The 'Big 3' have the size and reputation to hold onto their market share. If you ran a business and needed to migrate from your own physical data centre to the cloud, you wouldn't skimp on costs by picking an unknown service provider. Service continuity in a digital environment is just too important. Vestact hosts its business on Amazon Web Services (AWS).
The giants also have economies of scale on their side, so they can offer better pricing.
FedEx (NYSE:FDX) recently announced that they will close their final data centre in 2024, then be entirely on the cloud. The company expects to save $400 million annually by shifting! Other large entities will be doing the same calculations. With these growth rates, Amazon might even end up being a cloud computing business, with a side interest in retail e-commerce.
Bright's Banter
The prices of non-fungible token (NFT) artworks are falling off a cliff. Popular name brands like Azuki, Bored Ape Yacht Club and CryptoPunkss have seen their sales sink in tandem with the price of Bitcoin and other cryptocurrencies.
The crypto-collectibles market just recorded its worst month ever, with sales volume tanking below the $1 billion mark for the first time since June 2021. Opensea, the largest NFT exchange, has seen sales volume drop by 80% since May.
Some diehards believe that this is just all the craziness in the system bleeding out, and that prices are now more appropriate. I'd say that the NFT market really needs the prices of major cryptocurrencies to be much higher for this "asset class" to recover. I'm sceptical.
Signing Off
Asian markets are mostly up today with the exception of Hong Kong's Hang Seng index. Have you been to Hong Kong? Nice place, but we are told it's been ruined by the communists since being returned to China.
The rally in Asian stocks was aided by a big bounce in chipmakers after a Samsung Electronics' good results.
US equity futures are in the green again, but it's too soon to gauge how Wall Street will trade later today. The Rand is punch-drunk, staggering around at about R16.75 to the US Dollar.
