While some investors are worried that that recent softness in European and US manufacturing indices is indicative of a peak in global growth, I feel that the decline in these indices are more likely to reflect temporary factors.
The solid economic growth outlook remains intact and many of the risks that were concerning investors over the past couple of months have diminished. Fears of Sino-US trade wars and mass technology company regulation have receded, the North Koreans are talking denuclearisation and the lift in US inflation has been modest and in line with expectations.
More recently investors have switched attention to the first quarter earnings season in the United States, and so far the results have been better than average. Of the 80 per cent of S and P 500 companies that have reported 78 per cent beat earnings estimates with aggregate earnings about eight per cent higher than expected and, pleasingly, a record 77 per cent of the companies reported stronger-than-expected revenues.
The results show that the uplift in earnings has not just been due to tax-cuts and share buy backs but also organic growth. Yet the stronger-than-expected earnings picture has not been reflected in valuations with the S and P 500 trading in-line with its average valuation multiple over the past five years.
I remain positive on international equities with a preference for US exposure over other developed markets largely due to the stronger US growth outlook and larger weighting to high-quality technology businesses that, on the whole, are showing few signs of slowing down.
Alphabet Inc (Google) was dragged lower on concerns that Facebook’s woes might spark increased regulation for digital advertising more broadly. This was compounded by reports France is looking to fine Apple and Alphabet for “abusive commercial practices” towards smaller French software developers who sell apps on Google Play or the Apple App Store.
Furthermore, the European Commission is pushing for higher taxes on multinational IT companies, with some politicians lobbying for a tax on revenue. I believe any such tax reforms will face many hurdles and would be slow to implement. I remain confident the business can continue to perform well.
Apple Inc. has bounced back to life after trading lower on indications from its supply chain that iPhone sales have been soft. Additional evidence emerged in April when Chipset manufacturer (and key Apple supplier) TSMC lowered forward guidance because of “continued weak demand from our mobile sector”.
MicroLED is a new display technology that Apple is developing in an effort to reduce its reliance on Samsung’s OLED displays in future.
Apple disclosed that the number of paid subscribers for Apple Music has grown to 38 million in March (from 36 million in December). This puts Apple Music in second place behind Spotify which claims 71 million paid music subscribers globally.
Apple Inc. has bounced back to life after trading lower on indications from its supply chain that iPhone sales have been soft...Apple disclosed that the number of paid subscribers for Apple Music has grown to 38 million in March.
- Christopher Hindmarsh
- This article does not take into account the investment objectives, financial situation or particular needs of any particular person. Accordingly, before acting on any advice contained in this article, you should assess whether it is appropriate in light of your own financial circumstances or contact your financial adviser. Christopher Hindmarsh is an adviser at JBWere Limited. JBWere Limited is owned by NAB.