Category Archives: Market Reports

The Confidential Report – April 2019


Wall Street

On Friday 22nd March 2019, Apple announced their results to the December 2018 quarter. Turnover was down 5% at $84,3bn while quarterly earnings per share (EPS) were up 7,5% at 418c. 62% of the company’s sales came from outside the US. iPhone sales were down 15%, while sales from other products were up 19%. It also warned that the first quarter of the 2020 financial year would be weak because of poor sales in China. The market didn’t like these results and forecasts and the share price fell by 7%. This in turn dragged the entire S&P down by 1,9% as other tech stocks fell in sympathy. Donald Trump’s “trade war” with China was obviously partly to blame. The drop in the S&P500 index took it just below support at 2813 – but this was an over-reaction and the S&P has bounced back closing at 2867 last night. The resistance level has become the support level – which is common in this type of upside breakout. Now, we expect the S&P to move up strongly towards its record high of 2930. It is just over 2,1% below that level now. And, ultimately, we expect it to exceed that high and the great bull market, which has been in progress for ten years, to continue upwards. Consider the chart:

S&P500 Index September 2018 to April 2019 – Chart by ShareFriend Pro (Click to enlarge image)

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The Confidential Report – March 2019


US Economy

American GDP growth in the 4th quarter of 2018 was 2,6% – slightly higher than the 2,4% consensus forecast, but noticeably lower than the third quarter’s 3,4% or the 2nd quarter’s 4,2%. This still gives America an average GDP growth rate of about 3,1% for 2018 – which may not sound like a lot, but given the size of their economy (more than double the second largest economy in the world) it is very significant. It is enough to drag the rest of the world economy out of recession and into growth.

Obviously, this must be seen in the context of Trump’s substantial once-off tax cuts which are probably beginning to wear off now. It must also be seen in the context of the massive monetary policy stimulation of the previous ten years.

All of this is playing out in the stock market as can be seen in the chart of the S&P500 index:

S&P500 Index September 2018 to March 2019 – Chart by ShareFriend Pro (Click to enlarge image)

Here you can see that, following its record closing high of 2930 which occurred on 20th September 2018, the S&P entered a corrective phase. That correction was made worse by Trump when he effectively shut the US government down for five weeks in December. The US shut-down resulted in a “V-bottom” because as soon as investors came back from their year-end holidays they bid the market back up steadily. Read More

The Confidential Report – February 2019


The American Economy

The Federal Open Markets Committee (FOMC) in America raised rates on 19th December 2019 by 0,25% to take them to 2,5%. This is the ninth 0,25% increase in rates since rates began to rise in January 2016. This came after rates were stable at a record low of 0,25% for seven years from January 2009 – following the 2008 sub-prime crisis. The steady, gradual increase in US interest rates since the beginning of 2016 means that US Treasury Bills (T-bills) are becoming more and more attractive to investors relative to the government bonds of other countries, including South Africa. This tends to cause funds to flow out of emerging economies like ours and into first world countries. The steady rise in US rates also means that the FOMC has confidence in the strong recovery of the US economy. This has positive implications for the base and precious metals which South Africa exports. Of course, it also puts pressure on the rand – which directly impacts the fuel price and, in the medium term, the inflation rate. Read More

The Confidential Report – December 2018


America

The American economy continues to grow rapidly. A survey of fund managers by Bank of America in September 2018 showed that on average they currently expect the S&P500 index to rise at least 12% more before peaking. They are allocating a further 10% of their cash flows to US stocks than they did in October 2018 – especially into the high-tech stocks like Facebook, Amazon, Apple, Netflix and Google (the “Faangs). On average they felt that the S&P would peak at 3056. On 4th December 2016, we predicted in an article, on the basis of a Point and Figure horizontal count, that the S&P would go to 3027. Now, finally, two years later, American fund managers are agreeing with us. In fact we believe that the S&P will go much higher than that before it turns.

S&P500 Index September to November 2018 – Chart by ShareFriend Pro

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The Confidential Report – November 2018


October Month

October month is never a good month for investors. Historically, the 1929 crash and the 1987 crash began in October and several other Octobers over the decades have been bad. Always, some investors will tend to get out of the market in October or in anticipation of a fall in October. This makes the October problem self-fulfilling to some extent and this year was no exception. Analysts have for a while been saying that world stock markets are over-priced based on the fact that the bull trend is now in record territory having been going on for nearly ten years (an opinion which we do not agree with). So, when October month comes along there is what appears to be good justification to get out of the market. Read More