Tech Wreck

Market Scorecard

US markets closed deep in the red again last night as sentiment continued to be bearish. Notably, the S&P 500 energy sector slumped 8.3%, its biggest one-day decline since June 2020. Other assets like bonds, oil and bitcoin were also tumbling. Traders are rattled about the Fed being too aggressive in their monetary policy tightening campaign, triggering a recession.

A survey of economists by The Wall Street Journal found that their collective prediction of a recession sometime in the next 12 months has risen to 28%, up from 18% in January. As you know, we do not share these concerns and expect the Fed to proceed carefully. Stay long and strong!

In company news, BMW is delivering cars without Apple (NASDAQ:AAPL) CarPlay or Android Auto software, due to chip shortages. Elsewhere, Palantir shares plunged 21% after the security software company missed on earnings and issued a weaker-than-expected outlook.

At the end of the day, the JSE All-share fell 1.78%, the S&P 500 dropped 3.2%, and the Nasdaq was 4.29% lower. Eina!

One Thing, From Paul

Vestact likes to invest in three broad sectors: technology, healthcare and consumer. That's where we think the best top-line growth, and thus, the highest stock-price returns will be found over the next decade.

Within the healthcare sector, we focus on pharmaceuticals, genetic testing and medical devices. Stryker (NYSE:SYK) is our preferred pick there, they make medical "spare-parts" for humans and surgical devices.

Stryker's recent first-quarter results were good, with sales up 8.1%. A solid top-line beat was a positive, plus an upward revision to sales guidance for the rest of 2022. It's not easy out there with a strong USD dampening international sales and supply-chain shortages.

More elective surgeries, like knee, hip and spine procedures are being carried out this year than last, other than in China, where crazy lockdown rules are still in force.

All in all, Stryker is a good stock to own for the long run. In the last 5 years it's up 95%. I'd expect it to repeat that performance in the next five years.


Byron's Beats

So far this year, the tech-heavy Nasdaq is down nearly 27%. That's 10% more than the S&P 500. At first glance it may seem that the tech industry has gone "ex-growth". Maybe younger generations have decided to ditch their phones and embrace their inner-caveman? Obviously, that is not the case.

People of all generations are using their phones more than ever. Every single industry is digitising fast and it's imperative to move to the cloud to stay competitive. Artificial intelligence is making life more efficient, whether through smart cars or a kettle you can turn on with an app. Don't even get me started on the incredible innovations we see in the healthcare space.

In the real world, technology innovation is thriving. What we are seeing on global markets is a valuation rerating, which is not unusual when interest rates start moving quickly. As Paul said yesterday, going from 0% to 3% is a normalisation of rates. We think most sectors can easily weather the change.

There may be a few weak companies that fall by the wayside, but I don't see the kind of washout that we lived through in 2008. Anyway, we came out of that stronger, and the same will happen now.


Michael's Musings

In these volatile times, it is important to remember that sharp market pull-backs are normal. This has been the worst start to a year since the 1930s, but there have been recent periods where the market has been significantly worse. In the image below, you can see that the market dropped nearly 50% in 2008; those were really scary times!

Over the long run, the stock market is the best performing asset class when you adjust for effort and liquidity. Broadly speaking, you buy your blue-chip stocks and the companies are run for you by world-class managers. Then, you wait. When it comes time to sell, your money is back in your bank account in 3 days. Effortless and with guaranteed liquidity, that's the best asset class around.

There's a catch though. In exchange for a fast-growing, low-admin, highly-liquid asset, we need to stomach wild swings in prices. Fear and greed are potent forces. Buffett calls the stock market a manic-depressive that makes a lot of noise. The best thing to do is to tune out.

Michael Batnick writes about how he handles volatile times - This is Average.


Bright's Banter

Disney (NYSE:DIS)'s Marvel Cinematic Universe is back in the headlines. The timeline-bending "Doctor Strange in the Multiverse of Madness" is doing exactly what all Marvel movies do - printing a boatload of cash in its first weekend. All those cameo teases, and repeated glimpses of Stephen Strange using magic to slice a bus in half paid off.

The Benedict Cumberbatch film also stars Benedict Wong, Elizabeth Olsen, and Xochitl Gomez. Of its $450 million global box office debut last week, $185 million came from the US, while the other $265 million came from 49 other international markets, with South Korea being the second highest earner at $30 million.

This Doctor Strange instalment is now the second biggest global start for a Hollywood film in the pandemic era, behind "Spider-Man: No Way Home". In addition to having the 11th biggest opening of all time, it's now also the fourth biggest global start for a Marvel film.

If you haven't watched the movie yet, do yourself a favour, get yourself and five other loved-ones tickets to the movies, and make sure you watch it in 3-D. The Disney share price sure needs it! Oh and yes, I watched it over the weekend, the only thing I can say is that you'll need prior knowledge of the first Dr. Strange movie.



Signing Off

Asian markets started lower but have pared losses thanks to a turnaround in China. The MSCI Asia-Pacific index trimmed a drop of about 2% in half as sentiment steadied.

The Rand is trading at R16.11 to the greenback.

US equity futures are finally in the green, providing some respite for global markets. At some point soon, bargain hunters will return. We will hang in there!

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