ARTICLES

Quarterlies

One of the major differences between the US equity markets and the JSE is that listed companies in America are required to report every 3 months, not every 6 months as they are on the JSE. The quarterly reports of the S&P500 companies are closely followed by investment analysts and predictions are made for their profits.

So, for example, we are now in the middle of the “earnings season” for the 4^th quarter of 2024 and 61% of the companies in the S&P500 index have reported their results. The average annualised level of earnings per share (EPS) is 13,1% above the previous year and also well above the average of analysts’ predictions, which was 8%.

This is the primary reason that the S&P500 index continues to be in a bull trend. Investors are discounting stronger and stronger profits into the prices that they are willing to pay for shares – especially those shares in the tech sector known as the “magnificent seven” (Alphabet, Amazon, Apple, Meta, Microsoft, NVIDIA and Tesla) whose EPS is up 19% on average so far in the 4^th quarter. Consider the chart:

This shows that so far in 2025 the S&P has been volatile, mainly because of the radical and on/off nature of Trump’s various statements on the subject of tariffs. Perhaps the best summary of our perceptions of the S&P is in our tweets:

23-12-24: “While we still believe that the upward trend is in progress, there will likely be a continuation of the current correction”.

2-1-25: “...we can expect the #SP500 to perform better as sentiment switches back to #riskon. Our view: the bull trend remains intact, and a new record is imminent.”

28-1-25: “The reaction to #DeepSeek was clearly overdone. Tech was over-bought and looking for a reason to correct. #Nvida is not threatened. The #Chinese were always going to copy Nvidia - just as they copied #Apple and #smartphones. Expect the #SP500 to rise to a new record high shortly.”

3-2-25: “Trump's #tariffs are the 2nd shock to markets in a week. Expect their impact to be short-term. We are still looking for a resumption of the upward trend in due course. The #SP500 has run quite hard, so the tariffs provide the justification for a pull-back. But the bull remains.”

About half of the companies that have reported on the 4^th quarter have referred to the impact of Trump’s tariffs which are expected to cut the EPS of S&P500 companies by between 1% and 2%. Gross domestic product (GDP) is also expected to come in 1% lower as a result.

Despite this, the productivity gains being made by companies implementing artificial intelligence (AI) is substantial. Meta, Amazon, Microsoft and Google are expected to spend about $320bn on AI tech in 2025 to boost their capabilities. Every sector of the economy is benefiting from AI. Retailers are using it to improve stock levels and reduce working capital, Banks are using it to identify and reduce fraud, industrial companies use it for predictive maintenance and healthcare companies are using it for drug discovery and diagnostics.

Altogether, it is clear that profits are being pushed up despite the implications of Trump’s tariffs – which may or may not actually be implemented - and this pattern is likely to continue.

We continue to be bullish on both the S&P500 and on the JSE. The JSE Overall index is in the process of breaking up out of the broadening formation that has been in progress since September last year. Consider the chart:

DISCLAIMER

All information and data contained within the PDSnet Articles is for informational purposes only. PDSnet makes no representations as to the accuracy, completeness, suitability, or validity, of any information, and shall not be liable for any errors, omissions, or any losses, injuries, or damages arising from its display or use. Information in the PDSnet Articles are based on the author’s opinion and experience and should not be considered professional financial investment advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Thoughts and opinions will also change from time to time as more information is accumulated. PDSnet reserves the right to delete any comment or opinion for any reason.

PDSNET ARTICLES

Smart Local Investors

The last two months have been wild on the markets – mainly because of Trump’s ill-advised, on-again, off-again tariff policies. The issue now is:

Will this morph into a full-blown bear trend? Or is this correction almost over?

From his election victory on the 6^th of November 2024,

Jerome Powell

The Federal Reserve Bank (“the Fed”) is completely outside the control of the President and Executive Branch of the US government. The chairman of the Fed is appointed for a renewable 4-year term by the President. The President cannot remove the Chair without cause. The current chairman, Jerome Powell was appointed by Trump during his first term as President and reappointed by

Uncertainty Soars

Investors are by their very nature risk takers, but they are always trying to reduce the risk which they have to take to a minimum. Donald Trump, with his threat of an international trade war and his on-again, off-again tariffs has significantly increased the level of risk in markets across the world. This can be seen in the extraordinary volatility in the S&P500

Liberation Day

Trump has done the unthinkable. He has deliberately engineered the collapse of the US and world stock markets in the nonsensical belief that somehow an international trade war will make Americans richer. Nothing could be further from the truth. His actions have taken the S&P down from its all-time record high of 6144.15 on 19^th February 2025 to Friday’s

The Creation of Money

The money supply of a country is a symbol of the goods and services of that country. Obviously, if the size of the money supply is increased more rapidly than the real growth of its economy, then you have more money chasing the same goods and services, resulting in rising prices. Since, over the long term, the only organisation that can create money is the government,

V-Bottom is likely

The 10% collapse of Wall Street, which is a direct result of Trump’s random policy of on-again, off-again tariffs, is very similar to what happened to Wall Street in February/March 2020 when investors tried desperately to accurately discount the impact of the COVID-19 pandemic.

Normally, corrections in the market

The Trump Correction

It is relatively unusual for the activities of American presidents or what they say to have an impact on the New York Stock Exchange, especially during their first 100 days in office. Trump, however, is the exception. His confused, on-again, off-again rulings on tariffs have rattled the market. Markets hate uncertainty and even Trump himself doesn’t appear to know exactly

Dividends

Investors know that the return on a share is made up of a capital gain plus the dividend. Private investors are mostly attracted to the prospect of making a capital gain on the shares which they buy and do not often consider the dividends. What they perhaps do not realise is that a capital gain is actually just the dividend in a different form.

Gold's Record Run

On Friday last week, gold reached a new all-time record high of $2871.42 per ounce. Its gain in rands has been even more impressive rising from less than R1000 per ounce in August 1992 to last Friday’s close of R52864.85.

In our Confidential Report of March

Growth by Acquisition

Hudaco (HDC) is a master of growing by acquiring smaller businesses in similar fields of activity or businesses, which then complement its existing suite of businesses. It has been making these bolt-on acquisitions for many years and has developed great expertise at selecting and evaluating appropriate targets.

These bolt-on acquisitions are mostly small