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The S&P 500 sank again, third week in a row, Putin turns off gas to Europe, London funds lose £10 billion of investor money, China locksdown and oil prices decline, US part-time workers can’t find full-time jobs, chipmakers hit by AI China export ban, a free ebook and oh, we’re also in a ‘superbubble’.
Hello Accumulators,
The S&P 500 sank again, third week in a row, Putin turns off gas to Europe, London funds lose £10 billion of investor money, China locksdown and oil prices decline, US part-time workers can’t find full-time jobs, chipmakers hit by AI China export ban, a free ebook and oh, we’re also in a ‘superbubble’.
Phew.
Let’s get to the numbers…
Major indexes
DOW -2.70%
NASDAQ -3.25%
S&P 500 -2.73%
FTSE 100 -2.65%
Weekly close, 2nd September 2022
Markets
According to Jeremy Grantham, co-founder of GMO, we’re in a superbubble. I think there are lower stock market prices to come so I’m giving the market a ‘neutral’; my largest portfolio position is still cash so it’s all good.
Right?
Investors unfortunate enough to be in some of London’s top funds have seen their investments crater to the tune of £10 billion.
*rolls eyes*
This happens so often that many investors have shunned actively managed funds in favour of passive index investing. And are doing nicely.
The increased volatility in the markets and the inability of fund managers to ‘weather the storm’ will see that trend continue.
The market has been so starved for good news lately that the jobs report was ‘well-received’ despite containing indications of a fractured jobs market.
The US added 315,000 payrolls in August. Leisure, transportation, warehousing, and hospitality are still understaffed.
Part-time workers cannot find full-time jobs.
Oil is declining in price, mainly driven by China’s severe lockdowns as it pursues a zero-covid policy.
Oil is still overvalued in the large-cap equity space though; Exxon Mobil is trading at all-time highs.
The S&P 500 is looking cheaper by the day and its top 10-15 constituents trade at favorable multiples. Good news if you’re a value investor as you can pick up corporate America on the cheap ATM.
Technology is the go-to sector for outsized future performance despite the US government banning the sale of AI chips to China. There’s simply too much innovation in the sector for it to be ignored.
Inflation especially in Europe, is in joint first place with global quantitative tightening, for declining equity prices.
So long as Putin wages war and keeps the gas supply to Europe closed, inflation and rising rates will kill any chance of a return to global growth through 2022.
Investors who proceed with caution will win out in the end.
***
Bear markets and corrections are part of the game but that does not mean you have to be a victim of them. Passive investing using index funds is an excellent way to get around this.
I use index funds as part of my strategy and I’ve written an ebook which you can download for free to read more about this investing strategy - [FREE EBOOK]
News that matters
Major stock averages slide for third week, Nasdaq posts six-day losing streak
U.S. equities fell on Friday to cap their third straight weekly decline.
Putin shuts off EU’s Nord Stream gas supply – POLITICO
Gazprom says equipment has to be taken offline until it is repaired.
Revealed: Worst big City funds have lost £10 billion | Evening Standard
The ten worst performing big City funds have lost investors £10 billion since Christmas, the latest blow to the reputation of the active investment sector.
Here's where the jobs are for August 2022 — in one chart
The U.S. economy added another 315,000 payrolls in August, with jobs growth slowing overall but still widespread throughout the economy. The economy saw growth in all the key sectors and subsectors in August, led by a gain of 68,000 jobs in professional and business services.
US chip makers hit by new China export rule
Shares of major chipmakers Nvidia and AMD have fallen amid concerns of new US restrictions on the sale of artificial intelligence chips to China.
Oil Prices Under Pressure As China Expands Covid Lockdowns
China has locked down the city of Chengdu, beginning today, as the latest demonstration of its zero-Covid strategy. With a population of 21 million, Chengdu is the biggest city to be locked down in China after Shanghai, Bloomberg reports.
In a Wednesday research note, the investor noted that stocks remain “very expensive” and high inflation like the economy is experiencing now has historically led their valuations to contract.
Technical analyst quote of the week
“While we may not test the lows of this sell-off again, we also may not reach new highs any time soon”. Yeah, I don’t know what that means either.
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Exeunt
Yep, that’s a wrap.
I hope you enjoy the ebook, I wrote it in response to a question I received about index funds and how to invest in them.
Here’s the link again in case you missed it - [FREE EBOOK]
Until next week.
-D J Thomas