Head of Saxo Strats
Summary: Earnings releases are continuing with several interesting companies reporting this week with the most notable being HSBC, Square, Home Depot, Booking, MercadoLibre, Salesforece, Moderna, Nvidia, and Berkshire Hathaway. Based on the latest earnings data the Nasdaq 100 has seen Q4 earnings up 16% q/q compared to only 4% for the MSCI World explaining why technology stocks are still in high demand from investors. In this week's earnings release we are focusing on Nvidia which we expect to deliver exceptional earnings due to high demand from gaming, crypto, and data centers.
Earnings releases are still ticking in and last week’s Deere surprise upward revision to net income by 20% was a reminder that equities can still impact sentiment and provide valuable information late in the earnings season. This week several key companies will provide key valuable insights for their respective industries and the macro economy. Based on the latest earnings releases the clear winner is still Nasdaq 100 with 16% earnings growth q/q and Q4 earnings up 18% y/y, whereas MSCI World earnings are only up 4% q/q and down 5% y/y in Q4. Tomorrow, we will write again about interest rate sensitivity given the latest move higher in the US 10-year yield and whether equity investors should be worried.
The companies showed below are from the 30 largest companies reporting earnings this week. The companies marked in bold are the ones that we are watching carefully for their ability to impact their industry or providing valuable insights on the macro economy.
HSBC is interesting because of its large footprint in Asia Pacific and thus is good barometer on economic activity. We are watching Square earnings tomorrow because of its impact on the payments industry and because its high valuation is a test for other highly valued growth companies (it is also an Ark Invest position). Home Depot has seen strong performance in the past five years and the recent lockdowns due to the pandemic has raised home improvement demand. Booking is at the center of the travel and leisure industry which will be the biggest rebound industry in the second half of the year and any indications from the company that bookings are revealing pent-up demand is worth tracking. MercadoLibre was expected to have reported earnings a couple of weeks ago but surprised investors by postponing it; we expect strong results as all e-commerce companies that have reported Q4 earnings have delivered exceptional results. Salesforce is becoming one of the giants in terms of software applications and have shown consistent earnings for more than 10 years. Moderna is interesting in the light of AstraZeneca’s less efficient vaccine that is indicated to also be less effective against the newest mutations of Covid-19 which should boost demand even further for Moderna’s mRNA vaccine.
Nvidia could surprise big on crypto rally
The world’s largest producer of graphical processors is scheduled to release earnings on Wednesday after the market close with analysts expecting FY21 Q4 (ending on 31 Jan 2021) revenue at $4.8bn up 55% y/y and EPS at $2.81 up 82% y/y. Although the company has never emphasized or tried (maybe because it cannot) to create a segment for crypto, but analysts covering the company know that higher crypto prices stimulate demand for crypto mining which is predominantly done with Nvidia processors. The global chip shortage could be a headwind for Nvidia in the coming quarters so any news on that front would be insightful for investors
Clues on inflation from Berkshire Hathaway
Berkshire Hathaway reports Q4 earnings over the weekend and attention will be high this time as the investment conglomerate has just announced new major positions in Chevron and Verizon Communications in a sign that the company is tilting its portfolio towards hedging better against higher inflation. Any comments by Berkshire Hathaway on inflation will be scrutinized by investors as Warren Buffett is among the few active investors out there that has experienced the inflationary environment of the 1970s. As part of the annual report we might also get an update on the transition towards a new management of Berkshire Hathaway.
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
