Philippe Pratte comments:
-Employment at the heart of market concerns and prospects
This week, the focus was on employment, with markets diverging between various possible scenarios: a soft landing, a rate hike or a recession. Employment strength demonstrates potential of soft landing scenario. The employment data, while showing some robustness, also revealed nuances that merit further attention and analysis. At Pratte, we continue to monitor these developments closely, assessing their potential impact on markets and adjusting our strategies accordingly to navigate through these complex dynamics.
-Response to François Trahan's Market Predictions
We understand that the strategist's recent predictions of a potential market downturn may give cause for concern. However, we would like to reassure you by putting these predictions into perspective. Historically, markets have shown resilience and an ability to grow despite pessimistic predictions. For example, despite Trahan's earlier forecasts, markets such as the S&P500, TSX Composite and MSCI World have all shown remarkable growth.
It's crucial to recognize that markets fluctuate and are influenced by a multitude of factors. While pessimistic rhetoric and negative market predictions are inevitable and sometimes justified, it's just as vital to remember that investment opportunities often present themselves in these periods of turbulence and uncertainty.
The example of Michael Burry, an investor well known for his "bearish" predictions, illustrates that, while some predictions may come true in the short term, in the long term markets have historically tended to recover and grow. Thus, adopting a strategic, diversified and long-term investment approach has often paid off despite market fluctuations.
-Our Commitment at Pratte
We remain dedicated to actively monitoring markets, assessing risks and seeking opportunities in order to skillfully navigate through these uncertain times. Our commitment to your financial success is unwavering, and we will continue to work diligently to protect and grow your investments. At Pratte, we are committed to providing you with thoughtful investment strategies and ongoing support through diverse market conditions.
Before diving into the week's stock market news, I'd like to take this opportunity to wish you a pleasant long Thanksgiving weekend. Happy reading!
Your portfolios in brief
Uber is a technology company that has revolutionized the world of transportation. It offers a platform for connecting drivers and passengers. In recent years, Uber has diversified its services, offering food delivery with Uber Eats and, more recently, a package delivery service in the United States.
Highlights of 2023:
Expansion of delivery services: Uber has launched a parcel delivery service in the U.S. that offers users a new way to return packages without having to travel themselves.
Remarkable growth: Uber shares rose 80% in 2023, after falling 41% the previous year. This growth is attributed to the company's continued expansion and ability to adapt to changing market needs.
Financial performance: In the second quarter of 2023, Uber recorded revenues of $9.2 billion and gross bookings of $33.6 billion, an increase of 188% and 113% respectively compared with the same period in 2019. These figures demonstrate a company that has not only survived the health crisis, but has also become more dominant.
Why it's a stock to watch:
Demographic trends : The majority of Uber users are young adults, a demographic that is less likely to own a car and will likely require more transportation services in the future.
Diversification of services: Uber is not limited to ride-sharing. The company has expanded its services to include food and parcel delivery, demonstrating its ability to adapt and respond to changing consumer needs.
Evolution to a dominant platform: Uber management's strategy has been to tackle new markets and add additional services to the platform. This strategy seems to be working, as Uber had 137 million monthly active customers in the second quarter, completed 2.3 billion rides and is now present in 70 different countries.
Conclusion:
Uber, as a pioneer of the ride-sharing revolution, has demonstrated its ability to evolve and adapt to changing market needs. Interest in car ownership continues to decline, as a recent Statista survey shows. In fact, only a third of people who don't own a car are considering buying one in the future. The other two-thirds specifically prefer not to own one, citing reasons ranging from environmental concerns to cost and convenience. Against this backdrop, Uber, with its clear vision and well-defined strategy, has the potential to continue redefining the global transportation landscape. It is for these reasons that we have chosen to add this stock to our Pratte North American Equity Fund.
Market Brief
Monday
-Wall Street ends mixed
The session was marked by a mixed close on the stock markets. The Dow ended down 0.22%, affected by tensions surrounding bond yields. The S&P 500 and NASDAQ also experienced contrasting movements, reflecting investors' uncertainty about the current economic situation.
Apple (+1.48%), Microsoft (+1.92%), Amazon (+1.84%), Nvidia (+2.95%), Meta (+2.20%) and Alphabet (+2.52%), which account for around 40% of the index, dragged the other 94 NASDAQ stocks behind them and enabled the overall index to close in the green.
Bond yields played a major role in market behavior as the 10-year Treasury yield reached 4.7% at its session high, marking its highest level since October 2007. A significant rise in yields has created a tense atmosphere, prompting many investors to exercise caution. This trend in yields could have long-term implications for the cost of borrowing and the valuation of equities.
-Oil & Gas
Crude oil prices fell again for a fourth consecutive day, with West Texas Intermediate (WTI) trading close to 88 dollars a barrel (-2.2%). This downward trend was influenced by macroeconomic concerns, which overshadowed the tension on the physical market. A massive sell-off in sovereign bonds and equities strengthened the dollar, suggesting that the Federal Reserve could maintain higher borrowing costs for an extended period.
WTI has fallen by around 6% since last Wednesday's close, halting a rally that saw it rise by 29% last quarter due to tight supply. Higher interest rates make crude more expensive to store and transport, and a stronger dollar means it's more expensive for most buyers. The drop in oil prices led to a fall in equities across the energy sector. Exxon Mobil lost 2.1%, and Chevron was down 1.7%.
-Stockss in brief
NextEra Energy Inc (-8, 972%): One of the biggest declines of the session, perhaps reflecting concerns specific to the energy sector or the company itself.
Kellogg (-5.98%): The Kellogg group has split its North American cereal business, now under the WK Kellogg banner (-9.06%), from the rest of its portfolio, now called Kellanova. The entities are now two separate listed groups. This strategy is designed to exploit the growth potential of Kellanova, which is considered more promising than the cereals for which Kellogg is renowned.
Instacart (-9.20%): Recently floated on the stock market, shopping delivery platform Instacart has fallen, weighed down by an article in The Information, which mentions the cautious forecasts of several analysts who see its growth slowing down.
Tuesday
-Wall Street down sharply, impacted by bond yields
The New York Stock Exchange fell sharply on Tuesday, with Treasury yields reaching their highest level since 2007. The rise raised concerns about the impact of higher interest rates on the housing market and the possibility of an economic recession.
The Dow lost 430.97 points, or 1.29%, marking its worst day since March. The S&P 500 fell 1.37%, hitting its lowest level since June, while the NASDAQ was down 1.87%.
The 10-year Treasury yield reached 4.8%, its highest level in 16 years. This yield rose sharply last month as the Federal Reserve pledged to keep interest rates higher for an extended period. The 30-year Treasury yield reached 4.925%, also the highest since 2007. The average rate for a 30-year fixed-rate mortgage is close to 8%.
-Stockss in brief
Novavax (+8.18%): The laboratory received marketing authorization for its new coronavirus vaccine.
Eli Lilly (-2.43%): The pharmaceutical group announced its intention to buy biotech Point Biopharma (+84.89%) for around $1.4 billion, thereby strengthening its position in cancer therapies.
Airbnb (-6.47%): The platform suffered a decline after a KeyBanc note indicated that Airbnb's post-pandemic momentum was running out of steam.
Wednesday
-Wall Street buoyed by falling bond yields and an employment indicator
The New York Stock Exchange closed higher on Wednesday, boosted by lower bond yields and a job creation figure well below expectations. These factors have raised hopes that the US Federal Reserve will end its monetary tightening. The Dow Jones rose 0.39%, the NASDAQ gained 1.35% and the S&P 500 gained 0.81%.
The ADP report revealed that only 89,000 jobs were created in the private sector in September, well below the 150,000 expected by economists. This news cooled the bond market, which had been overheated for several weeks. The yield on 10-year US Treasuries, which had reached a 16-year high of 4.88%, fell back to 4.73%.
The seven largest U.S. market capitalizations, mainly technology with the exception of Tesla (+5.93%), including Alphabet (+2.23%) and Amazon (+1.83%), were the best performers.
-Stockss in brief :
Tesla (+5.93%) : Tesla was one of the main companies to pull the stock up with a significant increase in value.
ExxonMobil (-3.74%): Despite the fall in oil prices, ExxonMobil saw a significant drop in its value.
Chevron (-2.33%): Like ExxonMobil, Chevron also suffered from the fall in oil prices.
Intel (+0.67%): Intel announced its intention to spin off its subsidiary Programmable Solutions and float it on the stock market, arousing investor interest.
Boeing (-1.16%): Despite a firm order for 50 787-9 Dreamliner aircraft from United (+2.17%), Boeing's share price declined.
Ford (-0.66%): Although Ford reported a 7.7% increase in third-quarter sales in the U.S., its shares declined.
Thursday
-Tensions on Wall Street: Major indices down slightly
The session ended slightly lower, with the Dow down 0.03%, the NASDAQ down 0.12% and the S&P 500 down 0.13%. This retraction reflects investors' cautious stance, as they eagerly await a key employment report due the following day (Friday). Despite this climate of uncertainty, the market managed to contain its losses, largely thanks to the stabilization of bond yields.
The 10-year US Treasury bond yield was 4.71%, compared with 4.73% at the previous day's close.
-Employment data
Initial jobless claims for the week ending September 30 were 207,000, an increase of just 2,000 on the previous week. Economists had forecast 210,000, according to a Dow Jones consensus estimate. Although this slight increase in jobless claims was in line with expectations, it disappointed some investors who had hoped that the weekly data would begin to signal a slowdown in the labor market.
-Stockss in brief
Rivian (-22.88%): The company announced a convertible bond issue for a total of $1.5 billion, which led to a sharp drop in its share price.
ExxonMobil (-2.55%): Despite announcing a rise in third-quarter earnings, the share price declined due to lower crude oil prices.
Coca-Cola (-4.83%), McDonald's (-1.40%) and PepsiCo (-5.22%): These companies were affected by investor concerns about the impact of new obesity treatments, such as Ozempic, on the consumption of sugary and fatty foods.
Friday
- Market tensions: Treasury yields and employment data upset indices
The Dow dropped 150 points, or 0.4%, while the S&P 500 and NASDAQ fell by 0.6% and 0.7% respectively.
The US economy added 336,000 jobs in September, far exceeding economists' expectations of 170,000. However, wages rose less than expected last month. As a result, the yield on the 10-year Treasury note climbed to a 16-year high of 4.845%.
