01st November 2021

Good morning,

Earnings continued to flood in last week, with a number of mega tech names making most of the headlines. However, earnings across the board have been better than expected with the energy and financials seeing the largest percentage ‘beats’ in the US. Within tech, Apple took a $ billion hit to sales due to supply chain issues, as mentions of the global supply bottlenecks rose significantly across commentary in all sectors. As a result, Apple lost its crown as the world’s most valuable company to Microsoft with both companies worth just shy of $2.5tn.

It wasn’t all cold hard financial data last week, as the Facebook group (which includes the likes of Whatsapp and Instagram) will now be known as ‘Meta’ and will trade under the ticker MVRS from next month. The end of the FAANG acronym? Also, keep an eye out for unrelated names such as Canadian mining firm Meta, and the tech ETF with the ticker META – no doubt both will see inexplicable inflows in the coming weeks.

For those like me who had to look up what the ‘metaverse’ is, BofAML report that the phrase was first coined in Neal Stephenson’s 1992 science fiction novel ‘Snow Crash’, where humans interact with avatars in a realm where the lines between the real and virtual worlds is increasingly blurred. For those of you currently unconsciously rolling your eyes, I’ll leave you with a final thought. Singer Ariana Grande attracted 78 million people to a virtual concert within the video game Fortnite earlier this year. Whichever way you slice that up, it comes with some undeniable commercial opportunities.

Weekly Investment News
October defied the history books as markets recovered strongly across the month and finished out on Friday at record highs. Whilst slightly disappointing earnings from Apple and Amazon dominated the headlines, the upward trajectory for earnings in general has been clear. With just short of 75% of companies having reported, the S&P is on course for an average earnings ‘beat’ of 7%. Whilst this would be the weakest since the pandemic it is still positive and suggests that the global economy will continue to see positive growth even after the initial post COVID rebound.

Economic data and a generally optimistic political mood in Washington also contributed to the gains for equities. Before flying out to the G20 and COP26 summits, President Biden appears to have made some progress in consolidating Democrat support for his infrastructure bill. New Home Sales increased 14% and US consumer confidence also grew for the first time in three months, with personal spending rising 0.6% in September. A growing expectation of a holiday season spending splurge, including the highest number of vacations since 2019 augers well for the US economy, albeit under the shadow of supply chain issues.

Data from the eurozone was broadly positive, with preliminary GDP growth for Q3 coming in ahead of expectation, although inflation was also strong – driven by energy costs. The ECB kept monetary policy unchanged as expected, but President Lagarde’s subsequent comments left the market slightly underwhelmed in relation to the path for future interest rate rises. The commentary from central banks (note the Fed and Bank of England this week) will be closely watched, as there has been a growing divergence between the monetary policy being priced in by the bond markets vs the commentary emanated from global central bankers.

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