Tech Takes A Refreshing Shower

  • Market Overview

Market Scorecard

US markets enjoyed another positive session last night, as the upbeat tone in recent days continued. Central bankers are now expected to consider a smaller increase in interest rates at a policy meeting next week. The S&P 500's information technology segment was the best-performing sector in the index with companies like AMD (NASDAQ: AMD ) and Nvidia (NASDAQ: NVDA ) rising 9.2% and 7.6%, respectively.

In company news, Salesforce (NYSE: CRM ) closed up 3.1% after the Wall Street Journal reported that activist manager Elliott Management had taken a big stake in the software company. Elsewhere, Spotify advanced by 2.1% after the music-streaming giant said it was joining the chorus and laying off 6% of its staff.

At the end of the trading day, the JSE All-share closed up 1.08% and ended above 80 000 points for the first time ever, the S&P 500 gained 1.19%, and the Nasdaq added a meaty 2.01%.

One Thing, From Paul

We all like to shout about South Africa's problems. In fact I did that myself last week. You can watch the video clip (41 400 views so far) here: They Are Not Fit To Govern. Be careful, there are some F-bombs there which might offend younger viewers.

I love South Africa. It has great people and an amazing climate. I think we should all stay here and start new businesses, or build up the ones that we have already.

Working for yourself is fun because you can be in charge of your own fate. Plus you get to employ people and help them to improve their lives. Service levels are not great in this country, so if you run your company well you'll stand out and be cherished by your customers.

If you are older and don't feel like taking on the risk of a new for-profit venture, start a club or social organisation.

Michael's Musings

Austrian-born economist and Harvard lecturer, Joseph Schumpeter, is famous for saying that capitalism needs recessions because it is like a good cold shower for the economy. He meant that during the good times, companies tend to get lax and waste money. It takes a recession to reset, and relook at their budgets. This makes the economy stronger.

The tech sector is going through its own reset now. Since the setback of the dotcom meltdown in 2000, tech companies have been on a growth fast track. They grew exceptionally quickly, with very low costs, meaning they never had to think about the expenses column in their income statement.

Now that growth is slowing and competition is increasing, costs have come more into focus, the result being that about 200 000 people have been retrenched in the tech sector over the last year. Apple (NASDAQ: AAPL ) has managed to avoid major layoffs, in part because its workforce expanded by just 20% since 2019, compared to Amazon's (NASDAQ: AMZN ) doubling in size, Meta's (NASDAQ: META ) jumping 94%, Alphabet's (NASDAQ: GOOGL ) 57%, and Microsoft's (NASDAQ: MSFT ) 53%.

As a shareholder of these tech titans, this cold shower is good for your long-term prospects.

You needn't worry that the retrenchments mean anything about the economic outlook, they were probably overdue - Stop Worrying About All Those Tech Layoffs.

Bright's Banter

Taylor "ka-ching" Swift brought in big bucks last year. According to JP Morgan, Swift's album "Midnights" helped generate more than $230 million in sales for Universal Music Group. She sold 6 million albums in eight weeks and became the first album in history to capture the entire US Billboard Top 10.

Swift represented close to 3% of the company's revenue from recording music in 2022. They even raised their organic sales growth estimates for the last three months of the year to 10% from 6% just because of her album.

It's important to note that this was just music sales for UMG (AS: UMG ) and doesn't include the $591 million in ticket sales she will rake in from her 52 "The Eras" tour this year. To put that in perspective, the highest-grossing tour of all time belongs to Ed Sheeran who grossed $776 million for his "Divide" tour from 2017 to 2019, doing 255 shows.

If she extends her tour by adding roughly 25 performances, she will easily land the highest-grossing tour of all time, with just 77 dates.

Signing Off

Japanese markets had another good session this morning, closing up by close to 1.5% . Chinese markets remain closed for Lunar New Year celebrations.

US equity futures are little changed in early trade, but we expect some movement once Johnson & Johnson (NYSE: JNJ ) reports quarterly numbers , before the market opens. Microsoft will be the first big tech player to report, soon after the close tonight. Two core Vestact portfolio holdings, so we are excited.

The Rand is trading at around R17.20 to the US Dollar.

It's just another sunny day in Africa. Enjoy!

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