The action overnight between the SPX (S&P500) and the NDX (Nasdaq) is quite telling.
The SPX was flat, and NDQ was down sharply, as Snapchat grew more slowly than expected, citing macroeconomic impacts. The stock was off 42% after hours, as supply chain, labour, and energy costs all bit into margins, and that seemed to weigh on stocks like Amazon, Meta, and so forth.
Firstly, I wouldn’t draw any macroeconomic inferences from a stock that sells you ads whilst deleting temporary photos from your phone.
Secondly, I’d argue the vagaries of youth (tastes and preferences) is what drives adoption/sales for that company, in ways I’ll probably never quite understand, but that aren’t related to sales in the broader economy.
Third, and here lessons are drawable, is that some “secular growth stocks” are not proving quite so secular after all. If margins for a stock that is meant to be unrelated to the economy are impacted by things related to the economy, should you pay a premium? Probably not.
Fourth, the S&P500 is flat whilst the tech-heavy, secular growth stock heavy, NDQ is down reflecting the valuation issue highlighted below. The growth stocks are overvalued.
It isn’t so much a growth scare (yet!) from tighter policy, or the impact of higher rates per se, but rather a reassessment(perhaps triggered by the higher rates) of what is reasonable in the first place.
That, perhaps, is the lesson to take.
Important Information: This document has been prepared by Aequitas Investment Partners ABN 92 644 165 266 (“Aequitas”, “our”, “we”), a Corporate Authorised Representative (no. 1284389) of C2 Financial Services, (Australian Financial Services Licensee no. 502171), and is for distribution within Australia to wholesale clients and financial advisers only.
This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.
Please note that past performance is not a reliable indicator of future performance.
General Advice Warning: This document has been prepared without taking into account your objectives, financial situation or needs, and therefore you should consider its appropriateness, having regard to your objectives, financial situation and needs. Before making any decision about whether to acquire a financial product, you should obtain and read the relevant Product Disclosure Statement (PDS) or Investor Directed Portfolio Service Guide (IDPS Guide) and consider talking to a financial adviser.
Taxation warning: Any taxation considerations are general and based on present taxation laws and may be subject to change. Aequitas is not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and investors should seek tax advice from a registered tax agent or a registered tax (financial) adviser if they intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.