The Data Avalanche continues and this week is truly the “Super Bowl” of the stock market. We are heading into the 4th quarter now with just a few more things left. In this quick, 5 minute update, I wanted to talk about key take aways from earnings to the FOMC meeting today and what the directions of the markets will be after this. The format will be:
Google, Microsoft and META Earnings key take-away’s for growth investors
Shopify earnings and what it means for Global-E
FOMC
Direction of the market
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This Last Weekends NewsLetter
I mentioned exactly what I am looking for in regards to this week. It is not necessarily the data that’s coming out, because I knew it will be terrible and tomorrow’s GDP release will likely come out negative (bringing us to a technical recession). It was a select few aspects to the earnings that I am watching from major tech players as well as the FOMC meeting. If you missed it…
Earnings Highlights for High Growth Portfolio’s
I was primarily focused on three companies to this point but will still be watching Apple and Amazon. Those three were Microsoft’s Azure growth, Google Cloud and Shopify’s demand. The reason I was following this was to identify if there was any break in the secular trends of cloud or e-commerce. In other words, the details were in the data. Here is what we found:
Cloud growth is still very strong. Google reported 36% YoY growth in Google Cloud.
Microsoft’s Azure grew 46% on YoY basis when adjusting to compensate for the unusual strength in the US Dollar this year.
This was important and acts as a leading indicator for many cloud stocks. It tells us the demand was there and that it is likely here to stay for the rest of this year. This is important for software, cloud, investors like myself.
Shopify did not have a great quarter, but it did not matter to the stock price.
After a solid C- quarter, missing on all metrics, Shopify’s stock price…. rallied 11.7%? This is important as it tells us that the worst has been priced in. Stocks bottom when they don’t go down on bad news anymore.
Pay attention to Amazon’s numbers tomorrow
AWS and Amazon shopping numbers are equally as important as what we have seen from other businesses so far, to this point. Analysts, so far, have been way off on everything for the past few years in bull and bear markets. I would look less into these “estimates” and more into what trends are happening beneath the surface. For example:
What is going on with e-commerce? Is it flat/stagnant like Shopify’s numbers?
Is AWS still growing 30%+ YoY?
Obviously Apple is important but it’s more of a hardware business that’s focused on B2C rather than B2B.
FOMC Take Away
Here’s the thing about the Fed and Fed policy, it’s the future expectations of the future results rather than the actual results themselves that matter. Tomorrow, we will get confirmation of any sort of market movement. In particular, I am going to be paying attention to bond yields in the 10 year and 2 year yield. Here’s what I heard:
JPow planting the seed for backing off hiking cycle
September rate hike between 0 bps - .5bps are all equally likely, this is data dependent
Only 75bps to 100 bps are being priced into the markets with only 4 meetings left
If Rate Hike Expectations Come Down, the Stock Market WILL Rally into the Back Half of this Year
This is a big if. If rate hike expectations come down that means the stock market has a massive weight lifted off of its shoulders in terms of worries about:
Economic recession/depression
“Breaking something”
Housing falling apart,
etc.
This rally will be even further stimulated if inflation and inflation expectations continue to come down.
I Will Cover More this Weekend in the Member News Letter
I will provide my full thesis and the direction of the markets and specific market sectors likely to perform in this recovery.
There is no doubt that this year has been volatile and bears have come out to play, in a serious fashion. But, over the next 2 days we are going to see exactly what will happen and the trend that will emerge for the next 6 months.
Stay Tuned, Stay Classy
Dillon