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The Global Economy in Pictures: April 2016

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The global economy has regained some composure, according to asset management firm Schroders.

In their view, markets have regained a risk appetite following action by central banks, the normalization of commodity prices, and a lack of materialization for tail risks such as a U.S. recession or a Chinese hard-landing:

The Global Economy in Pictures: April 2016

While volatility is indeed near its YTD low with the benchmark VIX down 32% since the start of the year, we would point out that this is potentially some calm before the storm.

Here are some upcoming waves, and we’ll see how they break:

Earnings and Buybacks: The blended earnings decline for the S&P 500 so far in 2016 Q1 is -8.9%, according to Factset. When earnings season is done and if this stays on target, it will mark the first time the index has seen four consecutive quarters of year-over-year declines in earnings since Q4 2008 through Q3 2009. That said, companies are doing whatever they can to stifle these declines via share buybacks. S&P Dow Jones says that nearly one-third of S&P 500 companies have cut their share counts by at least 4% in Q1 of 2016.

Will investors continue to be “impressed” by this financial engineering, or will the reality of declining earnings finally hit?

U.S. Recession Watch: The Atlanta Fed’s GDPNow model forecasts U.S. growth at just 0.4%.

Brexit: While the margin has widened on the Brexit vote in favor of the “remain” camp, one in five have still not decided how they are voting. This means Brexit is still in play, especially if there is any voter complacency as the referendum draws closer. A “leave” decision could have significant impact: Britain makes up 15% of the EU GDP, 17% of EU domestic demand, and 13% of EU population. This previous post shows why Brexit could be a losing proposition for everyone.

Debt: The amount of debt is also hitting center stage. In the U.S. auto loans and student debt are two separate $1 trillion debt markets. Credit cards is getting there as well, and 62% of Americans now live paycheck to paycheck. Sovereign debt will close in on $20 trillion by the end of Obama’s tenure.

Things in China don’t look so good, either. Experts are warning that the country’s 237% debt-to-GDP, the highest in emerging markets, could lead to a American-style financial crisis or Japan-style malaise.

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Will Tesla Lose Its Spot in the Magnificent Seven?

We visualize the recent performance of the Magnificent Seven stocks, uncovering a clear divergence between the group’s top and bottom names.

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Will Tesla Lose Its Spot in the Magnificent Seven?

This was originally posted on our Voronoi app. Download the app for free on iOS or Android and discover incredible data-driven charts from a variety of trusted sources.

In this graphic, we visualize the year-to-date (YTD) performance of the “Magnificent Seven”, a leading group of U.S. tech stocks that gained prominence in 2023 as the replacement of FAANG stocks.

All figures are as of March 12, 2024, and are listed in the table below.

RankCompanyYTD Change (%)
1Nvidia90.8
2Meta44.3
3Amazon16.9
4Microsoft12
5Google0.2
6Apple-6.7
7Tesla-28.5

From these numbers, we can see a clear divergence in performance across the group.

Nvidia and Meta Lead

Nvidia is the main hero of this show, setting new all-time highs seemingly every week. The chipmaker is currently the world’s third most valuable company, with a valuation of around $2.2 trillion. This puts it very close to Apple, which is currently valued at $2.7 trillion.

The second best performer of the Magnificent Seven has been Meta, which recently re-entered the trillion dollar club after falling out of favor in 2022. The company saw a massive one-day gain of $197 billion on Feb 2, 2024.

Apple and Tesla in the Red

Tesla has lost over a quarter of its value YTD as EV hype continues to fizzle out. Other pure play EV stocks like Rivian and Lucid are also down significantly in 2024.

Meanwhile, Apple shares have struggled due to weakening demand for its products in China, as well as the company’s lack of progress in the artificial intelligence (AI) space.

Investors may have also been disappointed to hear that Apple’s electric car project, which started a decade ago, has been scrapped.

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