Holly's Blog: Rumbles in the jungle
28 April, 2022
Not a good week for the stock market as the big names in the States take a hit from the current difficult trading environment.
Apple Big Cahoonas warned that they could take a hit of up to $8 billion in this coming quarter from supply chain shortages (silicon) and factory shutdowns in China. Their results were a double-edged sword really – revenues were up 9% over the year and things today sounded pretty good. But the doom and gloom about the future saw shares fall by up to 4% after the results.
Equally gloomy Amazon posted its slowest-ever revenue growth in the first quarter, noting a drop in online retail sales and an increased cost base (higher staff costs and inflation). This sent its shares 10% lower after the results.
Investors less active and businesses struggling
Difficult markets and the lack of spare cash can be seen having an impact at Robinhood, the US broker which soared in lockdown as bored people sitting at home - not spending money on going out and playing with meme stocks and crypto - traded online. Their revenues are down by 43% from this time last year. It’s not just in the US either. Closer to home, pretty much every DIY investment house is talking about a disappointing first three months of the year. This is normally boom time in the UK as people scramble to top up ISAs and pensions before the end of the tax year. It can best be described as a limp squib this year.
Businesses are as impacted by inflation as consumers are. Stuff costs more to buy. Offices cost more to heat. Wages are going up. And Covid loans and support are drying up. A new report today confirms that there has been a 19% increase in the number of UK businesses in critical financial distress compared to the first three months of 2021. It feels pretty inevitable that the really weird jobs markets we have been in (loads of jobs, silly wage expectations, hard to find good people) will not be around for much longer?? Inflation is biting. Hard.
Don’t panic! Drugs, condoms and banks are the knights in shining armour!
But it’s not all bad. Sales at AstraZeneca were up by 60% in the first 3 months of the year, boosted by the Covid vaccine. And Reckitt Beckinser, the hugely glamorous maker of disinfectant and condoms, increased revenues by 5%. Go figure. NatWest profits were up by 40% from this time last year. Why? Growth in mortgages and higher interest rates.
So-called ‘Value Stocks’ (established mature and boring businesses which make solid stuff, turn a profit and aren’t run by CEOs who wear hoodies or buy media firms) are continuing to have a moment compared to the Growth brigade.
I think it feels pretty hard this year to work out how to diversify well and keep a good blend of things, against such a tough backdrop. Some food for thought……………I’m talking to Roland Arnold next Thursday at 6pm on our upcoming webinar – he runs the £1 billion BlackRock Smaller Companies investment trust. Is small beautiful?? Join us on that (live or on catch-up) and I’ll do my best to take your questions and put them to Roland. And this week’s sponsored article is from BlackRock again – the co-manager of their Frontiers Investment Trust on the ‘forgotten 40'.
I have held this trust for ages now and think it’s interesting. I actually have a small bit in the kids’ Junior ISAs (long-term by definition) and showed it to them a few years back when frontier markets were having a great run. For a while I had an 9 year old kid who thought that the secret of good investing was to buy more in Kazakhstan and Vietnam. Gulp! We had to have a little chat about diversification…..
Have a lovely long weekend everyone. Let’s all do a sun dance and pray for some RAYS!!!
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