15 Apr 15th April 2024
Weekly Index Movement
| S&P500 | -1.5% |
| Nasdaq | -0.6% |
| Aussie All Ords | +0.3% |
While April has historically been one of the best months of the year from a seasonal perspective, it hasn’t gotten off to a good start in 2024. Mmall-caps, mid-caps, Financials, HealthCare, and Real Estate are all down more than 5% month-to-date already in the US, while country ETFs like France, Germany, Italy, Spain, and Israel are off 4%+.
Commodity ETFs are the only ones moving higher this month, with silver (SLV) up the most at 13.5%. Treasury and other fixed-income ETFs are down 1%+ as interest rates have spiked.
It was the inflation numbers on Wednesday that caused this spike in interest rates. Monthly CPI came in at +0.4% for March which puts the annual rate to +3.4%, UP from the February number of +3.2%.
Traders took this higher reading to mean Fed cuts are off the table and therefore stock prices need to adjust lower.
The problem with a lot of stock investing is the speed and frequency of news these days. Inflation used to be only once every three months. Now it is monthly, and the path to 2% was never going to be a smooth one. One monthly number that does not go the way the Bulls want is not enough to stop the bull market. So just ignore this news and move on.
Sitting there and pondering whether the Fed will cut 3 times or not at all is not important.
That being said, Middle East tension is something that could cause problems.
For those that don’t know, Israel carried out an air-strike that killed an Iranian general on Syrian soil. Israel say he was planning an attack on Israel. Iran say Israel committed an act of war. In retaliation, Iran fired 300 missiles and drones into Israel on Sunday. They telegraphed this move and just about all were shot down by Israel defence and US warships in the region.
Iran had to do something, but it feels this was more a statement than a real act. It was just a show to say we could do something if we wanted to. It definitely was not serious. Which is why the market has not reacted today.
Oil has crept higher over the past month or so because all this has been building. What you need to do is add in some exposure to Oil companies to your portfolio. I always have a few sitting in mine because geo-political events are increasing. Oil is the perfect hedge against a surprise development.
The other event happening now is the start of earnings season. The big banks kicked off the reporting period this morning, and the results have been stronger across the board. All six companies reporting beat expectations on both the top and bottom lines. While JP Morgan (JPM) is down nearly 3% and Wells Fargo is down fractionally, the other four stocks are all up by at least 1%.
The First Way To Monetise AI
Everyone is talking about how AI will change the world. But it isn’t going to do it all at once and it looks to me like the first place to really benefit will be advertising.
This week, Google (GOOG) announced a chip that could rival Nvidia’s (NVDA) tech. And in chorus, Meta (META) also announced a chip of its own, giving both of these companies vertical integration to accomplish their objectives.
Those objectives are basically advertising.
As Bank of America’s Justin Post wrote in a research note on the move, Meta’s main AI benefits are getting people to use the product more, with better video recommendations to increase ad spend via better ads that are better measured.
Both Meta and Google are part of the Big Seven. All portfolios should hold these stocks and add to your positions on weakness.
Coal
Another sector long-time readers know I like. My argument to owning coal miners is the market is pricing them like they will be gone in 5 years. But it will take a lot longer to get there than that so these companies are a bargain.
New Hope Coal (NHC:ASX) is one of my favourites. Along with YanCoal (YAL:ASX)
New Hope went ex-div today. It paid 17 cents. It was trading at $4.80 on Friday so if we add in Franking credits then you get a 5% yield on the payment today – which we can annualise to 10% income returns per year.
If you are looking for an income investment to buy, I always like to buy them just after a dividend. You could have got NHC as low at 4.58 today. Buying after a dividend payment drop means you get more shares for the same investment so you will get more income in future on every single dividend you get ever, than buying before the dividend when you have to pay more and get less shares.
Now is the time to buy NHC for the next 10 years of dividends. Here is why.
The world added more coal power capacity last year than any year since 2016, with China driving most growth and future planned capacity, according to new research.
A report by Global Energy Monitor released Thursday found that net annual coal capacity grew by 48.4 GW, representing a 2% year-over-year increase. China alone accounted for about two-thirds of new coal plant capacity.
Other countries that brought new coal plants online included Indonesia, India, Vietnam, Japan, Bangladesh, Pakistan, South Korea, Greece and Zimbabwe.
Meanwhile, other countries such as the U.S. and U.K., slowed their rate of plant closures, with only about 22.1 GW retired last year — the smallest amount since 2011.
The world dependence on coal will be around for a long time yet.
Jimmy’s Corner
Neurotech International (NTI) ASX
This company has continuously released good news to the market and its investors and has doubled in price in the last 6 months.
Neurotech International is a company that conducts research, design, development and manufacturing of medical device solutions in Australia. The highlight of the company is the marijuana-based drug NTI164 which has been providing treatment for rare diseases. These are Pediatric Autism Spectrum disorder, Rett Syndrome, PANDAS/PANS and Cerebral Palsy.
They are currently undergoing clinical trials for each of the above and are experiencing good results. In the past 3 months, they have gotten additional approval from HREC to extend the research phase another 52 weeks, gained approval for the cerebral palsy trial, seen continued improvement in the PANDAS patients and have now completed Phase 3 of the Pediatric Autism trial.
The drug has seen great results so far with 93% of patients showing signs of improvement. Phase 3 results are expected to be released before July. If results continue to impress as previous, we can only see the stock price continue to climb. The great thing is, all these rare diseases are all facing a lack of effective therapies with a significant unmet medical need. If this goes well, NTI could fill this gap in the market and could be quite successful for investors.
Next Week
First-quarter corporate earnings kick into high gear this week with some of the biggest U.S. banks and the leading streaming company slated to report.
More than 35 S&P 500 companies are on deck to post their latest quarterly figures, including Goldman Sachs, Bank of America and Morgan Stanley. Netflix is waiting in the wings.
Warning
Stock values can go down as well as up. It is possible to lose 100% of your investment in a stock. Any advice given by Capital 19 is general advice only and does not take your personal circumstances into account and might not be suitable for you.