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- Weekly Wrap-Up - September 28th, 2024
Weekly Wrap-Up - September 28th, 2024
Chinese stocks give a nice boost to markets
CMG Venture & Mark Roussin
September 28, 2024
Good morning investors!
If this is your first time reading, welcome to The Investor’s Edge — a thriving community of nearly 20,000 subscribers striving to be better investors with an edge in the market.
Every weekend we publish “The Weekly Wrap-Up” — your ticket to being well informed and staying ahead in the investment game!
This report is designed to help investors of all skill levels break down important stories/topics within the stock market. And best of all, we cut through all of the BS and give you exactly what you need to know in easy to digest, bite sized pieces of content.
Grab your coffee and let’s dive in.
Market Talk
The major indexes all ended the week higher, thanks in large part to the boost from Chinese stocks. Bitcoin also had a good week rising over 4%.
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3 Stories Moving the Market
These are some of the biggest stories from the second half of the week that had an influence on market action.
Chinese stocks surge for best week in a decade
Source: Visual Capitalist
China's recent wave of monetary, liquidity, and fiscal stimulus has sparked optimism in the markets, driving a rally in Chinese stocks.
While it's unclear if these measures will lead to a sustainable economic recovery, investors appear willing to bet on Beijing's efforts. This has eased near-term concerns about growth and inflation, improving the outlook despite ongoing structural challenges in China's economy.
Globally, strong U.S. economic performance and proactive central bank policies are further brightening the picture. As a result, risk assets are surging.
The MSCI World and S&P 500 hit new highs, and in Asia, Shanghai's blue-chip index jumped 10.8% for its biggest weekly rise since 2014, with the broader Shanghai composite up 9.7%. Hong Kong's Hang Seng index saw its largest weekly gain in 13 years at 9%, while mainland Chinese property stocks soared 16%.
👉 EDGE TAKEAWAY: After being beaten down and undervalued for the better part of two years, Chinese giants like Alibaba, JD, and Tencent are .…upgrade to Edge+ to read the Full Edge Takeaway.
👉 EDGE TAKEAWAY: After being beaten down and undervalued for the better part of two years, Chinese giants like Alibaba, JD, and Tencent are finally seeing a resurgence. Back in February, we started adding Chinese stocks to our portfolio, and Edge+ members have had a front-row seat to these strategic moves. Congratulations to those who followed along!
But while the recent rally offers a much-needed boost of confidence, it’s not the time to get carried away. Yes, the relief is palpable given how depressed sentiment and stock prices have been, but Beijing’s latest stimulus measures aren’t a silver bullet. China still faces serious challenges, including a property sector crisis, the looming risk of deflation, and long-term demographic issues that can’t be ignored.
We’re thrilled to see our strategy pay off, but a healthy dose of caution is still warranted. This rally is a step in the right direction, but the road ahead remains uncertain. Stay sharp, stay informed, and let’s navigate this market together with discipline.
Key Fed inflation gauge at 2.2% in August, lower than expected
In August, inflation moved closer to the Federal Reserve's target, potentially paving the way for future interest rate cuts.
The personal consumption expenditures (PCE) price index rose by 0.1% for the month, resulting in a 12-month inflation rate of 2.2%, down from 2.5% in July and the lowest since February 2021. The Fed aims for a 2% annual inflation rate.
Core PCE, which excludes food and energy, also increased by 0.1% in August, with a year-over-year rate of 2.7%, slightly above July's figures. Economists had anticipated similar increases for both overall and core PCE.
However, personal spending and income growth fell short of expectations, with personal income and spending each rising by 0.2%, below the projected increases of 0.4% and 0.3%.
These inflation readings come shortly after the Fed lowered its benchmark overnight borrowing rate by half a percentage point to a target range of 4.75%-5.00%.
📚 EDGE-UCATION: What is the PCE index and why does the Fed prefer it for inflation?
The Personal Consumption Expenditures (PCE) price index is a key measure of inflation that tracks the prices of goods and services purchased by consumers in the United States. It's produced by the Bureau of Economic Analysis (BEA) and is a component of the broader PCE data, which measures overall consumer spending.
Why the Fed Prefers the PCE for Inflation:
Comprehensive Coverage: The PCE price index captures a broader range of goods and services compared to the Consumer Price Index (CPI), including expenditures made on behalf of households (e.g., employer-provided health insurance), which makes it a more comprehensive measure of consumer spending patterns.
Weighting Differences: The PCE uses a dynamic weighting system that adjusts more frequently to changes in consumer behavior. This means it can better reflect how consumers shift their spending in response to price changes, which gives a more accurate picture of inflation trends.
Less Volatility: The Fed often focuses on the core PCE, which excludes volatile food and energy prices. This makes the core PCE less susceptible to short-term fluctuations and a better gauge of underlying inflation trends over the long run.
Alignment with GDP: The PCE is part of the national income and product accounts (NIPA) and is consistent with other economic indicators like Gross Domestic Product (GDP). This makes it easier for policymakers to integrate inflation data with broader economic assessments.
The Fed prefers the PCE because it provides a more stable and comprehensive picture of inflation, which is crucial for making informed decisions on monetary policy.
Meta unveils $299 Quest 3S VR headset, Orion AR glasses prototype
Meta has unveiled the Quest 3S, a new virtual reality headset from its Reality Labs division, priced at $299—significantly lower than the $499 starting price of the Quest 3.
Set to launch on October 15, the Quest 3S is designed for various uses, including watching movies, VR fitness, and gaming, and is marketed as a multitasking computer, competing with Apple’s $3,499 Vision Pro headset.
During the Connect event in Menlo Park, California, Meta also showcased a prototype of its latest augmented-reality smart glasses and introduced new features for its Meta AI chatbot.
Despite Meta’s Quest devices being the bestselling VR headsets, with millions shipped due to aggressive marketing and competitive pricing, they have yet to create a cultural phenomenon or establish a mainstream software ecosystem around virtual reality.
Since acquiring Oculus in 2014, Meta has invested over $65 billion in its hardware initiatives.
In Other News
In this section, we'll be curating a selection of news headlines we think you'll find interesting. If a topic catches your eye, click the provided links to read more about it.
Micron stock soars as Q1 revenue forecast tops analyst estimates
OpenAI considering restructuring to for-profit, CTO Mira Murati and two top research execs depart
Arm Is Rebuffed by Intel After Inquiring About Buying Product Unit
Casino Stocks Advance Further on Optimism About China's Stimulus Moves
US Consumer Sentiment Rises to Five-Month High on Economy Views
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IE+ Posts of the Week
We continue to push out more and more content every week to give investors that edge. Here are the posts Investor’s Edge+ subscribers received this week.
Edge Report
Mondays are for the investors. Every Monday morning we share exactly what we’re watching in the week ahead, how we’re positioning, and even share a sneak peek into our systems and models. This week we discussed the upcoming earnings reports, pending inflation data and how this week is historically the worst week of the year for markets. See the latest full report here:
Stock Deep Dive - Target
Our Deep Dive focused on Target this week. We not only broke down the financials of this major retailer but we also shared our valuation models, price targets for 2024. We also unveiled our new Edge Scoring System. You can see the full analysis here:
Earnings Recap
Every week during earnings season we share a recap of the quarterly reports from stocks that we cover. You can see this week’s earnings recaps here:
The Week Ahead
The week ahead is all about the labor market and the numerous jobs reports scheduled. Now that the Fed has made its first rate cut, the market is anxiously waiting to see how the labor market is holding up for clues into the size of the next rate cut in November.
Earnings Reports
Earnings season is in the rear view mirror but there is a major name left to report. Here is the list of names we will be covering next week:
Monday 9/30: --
Tuesday 10/1: Nike
Wednesday 10/2: --
Thursday 10/3: --
Friday 10/4: --
Here is the full calendar of scheduled earnings releases:
Source: Earnings Whispers
Economic Reports
Next week is all about the labor market. There will be key jobs reports, including JOLTs job openings, ADP employment, the unemployment rate and initial jobless claims. But no report will be more important than Friday’s nonfarm payrolls report.
We also get manufacturing and services PMI data and a number of speeches from Fed members.
Want more? Check out our other resources
If you haven’t done so, check out the social media pages of our collaborators and give them a follow:
Mark (Dividend Seeker)
Chris (CMG Venture)
Thank you for reading this edition of the Weekly Wrap-Up. Have a great weekend!
Until next time investors!
Mark & Chris
The Investor’s Edge
Disclosure
This is not investing advice. It is very important that you do your own research and make investments based on your own personal circumstances, preferences, goals and risk tolerance.
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