Where the City’s movers and shakers get a few things off their chest. Today, it’s Interactive Investor’s Victoria Scholar.
Big Tech looks to be back in Vogue
BIG Tech suffered painful declines in 2022 with sky-high inflation and central banks scrambling to keep a lid on rising prices. Now with US inflation easing, and the Fed at or close to the peak of the rate-hiking cycle, anticipation of shifting monetary policy dynamics have seen investors pile back into the tech sector.
Some stocks have enjoyed impressive gains year-to-date with Meta, Tesla and Apple up over 85 per cent, 55 per cent and 35 per cent respectively. The recent buzz around AI has caught the eye of the investors searching for ways to get exposure to this burgeoning theme. This year Microsoft invested billions into ChatGPT, also helping turn attention to tech. On top of that, after years of expansion, tech companies have been cutting costs by slashing workforces to combat the challenges of inflation, weak ad revenues and slow growth. Meta’s CEO Mark Zuckerberg said this is the ‘year of efficiency’.
Fundamental investors would argue that a lot of the gains may already be priced in. Piling in after a big rally is not often deemed the best strategy. Instead, they seek underappreciated stocks with attractive price tags and the potential for upside.
The counter argument is that percentage increases from the lows are more flattering than percentage falls from the highs and many stocks remain sharply below their recent Covid-era tech boom highs with arguably more room to run.
The underlying US macroeconomic outlook, which is correlated with growth sectors like tech, is murky with analysts divided over whether the US will tip into recession or not. On the one hand, inflation is stuck above target and the backdrop of the banking sector turmoil could have negative reverberations. On the other hand, the trajectory for US inflation is encouraging and the jobs market remains resilient. Any signs of a rosier economic outlook could help tech enjoy a pick-up in consumer demand and stronger ad revenues ahead.
As good as gold
Luxury goods giant Richemont reported record full-year sales up 19 per cent with revenues in its all-important jewellery division up 16 per cent. Annual profit from continuing operations soared 60 per cent. The group behind brands like Cartier and Van Cleef & Arpels has been benefitting from the release of pent-up demand from China after its anti-Covid lockdown restrictions were removed as well as the resilience of high-end consumers amid the cost of living crisis. However, chairman Johann Rupert warned demand has been weakening in the US since November.
Sterling is on the up…
Analysts at Citi have changed their bearish tune on the pound. Having previously forecast that GBPUSD would fall to parity, a Citi analyst said “we have been wrong, plain, and simple”. The team now expects sterling to rise towards $1.30 by early next year as ‘activity has proven far more resilient’. However, after the pound hit a one-year high, Deutsche Bank analysts were less cheery, saying ‘having been bullish on the pound since the start of the year, we no longer think the pound presents attractive risk-reward in the short term’.
But are prices coming down?
Tesco, Aldi, and Lidl followed Sainsbury’s by cutting bread and butter prices. Sainsbury’s announced plans to reduce both items by 10p with the other supermarkets matching these price drops the following day. Critics argue falling wholesale food prices haven’t translated into lower consumer prices fast enough. Marmite maker Unilever’s CEO Alan Jope said last month ‘we are not profiteering in any form’, adding ‘we are very conscious that the consumer is hurting and that’s why we are not passing through the full price increases.’
Can I quote you on that?
“Excited to announce that I’ve hired a new CEO for X/Twitter”After a challenging period since taking over Twitter, Elon Musk will step down as CEO within weeks
What I’m listening to
It is easy to be enticed by the celebrity guests on The ii Family Money Show podcast such as Richard Curtis, Deborah Meaden and Rachel Riley, but the main draw for me is that it gets people talking about investing. It’s generally still an awkward subject for many but told through the lives and experiences of famous faces makes it much more accessible. Reassuringly, handling finances hasn’t come easy for some such as Alastair Campbell who leaves it to his partner Fiona to organise. This week’s episode features Nick Leeson, the original rogue trader who caused the collapse of Barings Bank in 1995.