This week’s focus: Actions, Reactions
In the short term, stocks tend to move on psychology and positioning – but over the long term, valuations and cash flow matter more. That’s why quarterly results are such an important driver. In fact, share prices make bigger moves now on earnings day than over the past decade – and it’s partly because of the growing understanding of how telling those updates are, but it’s also because of technology. An increase in computerised decision-making in markets and the shift toward passive investing have changed the market. These days, shares moved an average of 4.9% on their company’s earnings day – roughly four times the average.
So, you may want to hold onto your hat in the next few days if you’re investing in Tesla or Amazon. The two card-carrying members of the Magnificent Seven are set to release earnings. Let’s be honest, neither has been all that “magnificent” recently. Even as the S&P 500 has vaulted to record highs, investors in both stocks have seemed downright unimpressed.
Tesla’s recent robotaxi reveal was a classic case in point: Elon Musk’s big autonomous vehicle spectacle failed (spectacularly) to summon even mild enthusiasm from the market. Amazon’s another “prime” example: despite its gains in cloud computing service, its steep valuation has caused investors to rotate into cheaper companies – even while sticking with other high-priced Mags. When the firm opens its books this week, investors will be closely scrutinising its spending outlook on its AWS cloud unit – not for what it means for Amazon, but what it hints about Nvidia. The hyperscaler is one of the chipmaker’s biggest customers, after all. Nvidia, the do-no-wrong member of the original Magnificent Seven, hit an all-new high last week – the only one of the crew to do so.
Outside of US stocks and the Magnificent Seven, there’s another risk to keep on your radar: UK investors will be on edge for the next little while, watching for any hint about potential tax and spending plans to be included in the new government’s budget, due on October 30th.
This document is provided to you for your information and discussion purposes only. It is not a solicitation for business or an offer to buy or sell any security or other financial instrument. Any information including facts, opinions, or quotations, may be condensed or summarised and are expressed as of the date of writing. The information may change without notice and Trusted Novus Bank (“TNB”) is under no obligation to ensure that such updates are brought to your attention. Past performance is not a guide to future performance.
This document has been prepared by TNB from sources TNB believes to be reliable but TNB does not guarantee its accuracy or completeness and does not accept liability for any loss arising from its use. TNB reserves the right to remedy any errors that may be present in this document.
Trusted Novus is registered in Gibraltar under number 3207. Its registered address and principal place of business is: Trusted Novus Bank Limited, 76 Main Street, Gibraltar GX11 1AA. It is regulated by the Gibraltar Financial Services Commission (Permission Number 3207) to provide Banking and Investment Services. TNB is a member of the Gibraltar Deposit Guarantee Board (www.gdgb.gi) and the Gibraltar Investor Compensation Scheme (www.gics.gi).