Elon Musk strikes again and is now Twitter’s biggest shareholder. This diverted attention from the fact that investors are now seeking more security, with a record inflow to gold ETPs and US 10-year bond yields at a 3-year high. After the announcement of a more hawkish policy, the dollar became stronger worldwide, but it is still a good moment to convert reais to invest in the US as the rate hikes have not yet begun.
Major companies reporting earnings include:
- April 13 (Wednesday): JP Morgan (JPM), Blackrock (BLK), Delta Airlines (DAL)
- April 14 (Thursday): Wells Fargo (WFC), Morgan Stanley (MS), Goldman Sachs (GS), Citigroup (C)
- Elon Musk. Elon Musk has taken a 9.2% stake in Twitter Inc (TWTR), to become the platform’s biggest shareholder and new board member. Twitter stock surged 27.12% on April 4, after the first announcement, although it fell -5.4% on April 07. Investors are still evaluating if Elon’s addition to the board is beneficial to the company. On one hand, Musk could be a catalyst for change, imprinting on Twitter the same dynamism we see in his other companies – one example is that Twitter is now considering an “edit” button. On the other hand, he is a disruptive presence that brings chaos into companies, especially by openly criticizing government bodies.
- Gold. Investors run to the metal seeking protection from inflation and the uncertainties of war. Global inflow to gold exchange traded products (ETPs) hit an all time high of $11.3bn in March. That includes products such as the SPDR Gold Shares (GLD), and iShares Gold Trust (IAU). This still did not reflect in the commodity price, which was down -0.92% last week and -3.24% in the last month. This is because interest rates are increasing throughout the world, which also leads investors to allocate capital to safe interest paying assets despite their, such as T Bonds.
- US Bond rates. US 10-year bond yield surged to a 3-year high of 2.655%. The main fear is that the FED’s tight approach could hurt economic growth. This will especially impact tech stocks such as Amazon (AMZN), Meta (FB) or Tesla (TSLA), which trade at high revenue multiples. This means that investors are pricing a strong growth over the next few years, which may not materialize if the US’ economic growth slows down.
- HP Inc (HPQ). Berkshire Hathaway (BRK), Warren Buffett’s investment firm, disclosed that it had bought a $4.2bn stake in computer and printer maker HP Inc. This is Berkshire’s third monster deal this year, after the purchase of insurer Alleghany (Y) for $11.6 billion and the acquisition of Occidental Petroleum (OXY) stock worth $7.5 billion. Berkshire was not this active in more than 5 years, preferring to sit on its +$100bn war chest. This new activity shows that Buffett considers that good opportunities are back in the market. HP stock surged 14.75% after the announcement.
- Gamestop. Gamestop (GME) announced that it is planning a stock split, missing April Fools by a few hours. The move, which usually sends stocks up, did not go as planned, as the stock tumbled -10.04% on April 05, and -4.24% on April 07. Gamestop wants to get rid of its physical presence and focus on a digital format, to become an “Amazon of gaming”. Investors are not impressed with those plans, and 26% of Gamestop’s flow is sold short.
- Oil. Oil is down again for three main reasons: a massive stockpile release by the US, a virus outbreak in China will greatly lower demand and a tighter monetary policy from the FED will probably slow economic growth. Although oil is up 32% since the beginning of the year, its price is almost back to pre-war levels. This of course is bad news for oil producers such as Shell (SHEL), which is also writing off $5 billion in Russian assets as it halts operations in the country. However it is good news for companies that use oil directly, such as American Airlines (AAL) or Delta (DAL), and indirectly, such as Uber (UBER), as lower gas prices attract drivers to the platform.
- Electric vehicles. The year is proving difficult for EV producers. Some stocks such as Canoo (GOEV, – -30,2%), Lucid (LCID, -37.6%), Nio (NIO, -29.1%) and Rivian (RIVN, -59.3%) are stumbling since the beginning of the year. There are several reasons for this disaster. First, the price of the raw materials used in EV production increased exponentially. The price of the metals required to produce a 60kWh battery, enough for a large family sport utility vehicle, has risen from $1,395 a year ago to more than $7,400 in early March, according to battery group Farasis Energy. Second, producers are facing all sorts of supply chain problems and will most likely fall short of their production expectations for the year. Those startups do not have any expertise in manufacturing, and are having difficulties putting their EVs on the streets.
- The FED balance sheet. FED officials have agreed to trim US$95bn a month from the institution’s balance sheet. This is yet another step in a tighter monetary policy from the FED, which will probably negatively impact financial and tech stocks the most.
- Bitcoin (BTC) and Ether (ETH). Bulls and bears continue their battle in bitcoin, although the new restrictive monetary policy from the FED is giving the bears more strength. Last week bitcoin traders eyed a $38k dip. Price consolidated around $44k after almost reaching $48k, and traders were testing the $43k mark as a support. However, ARK Invest CEO Cathie Wood once again predicted that bitcoin would reach $1 million by 2030. Ethereum also suffered, as traders feared a dip to $2,900 if the $3,200 level did not hold. In the medium run, some analysts predict a $10k price, as network adoption picks up pace. Ethereum is settling $30.5 billion daily, fifteen times more than PayPal and has reached 625,000 daily active users.
- Exchange Rate (USD/BRL). The exchange rate is still hovering around the R$4.75 mark, despite volatility throughout the week. Last week the scenario was that the exchange rate would continue its down trend, but the new hawkish position from the FED means that investors may be less tempted to divert resources to emerging markets, which makes the dollar stronger. This shows how important it is to seize opportunity fast. However, investors should be aware that the exchange rate could fall a bit more, as the dollar fair price, calculated by inflation parity, is around R$4.50. There is still a chance for Brazilians to seize this opportunity and make real deposits that are now worth more in dollars.
- Financial companies earnings. Virtually all major financial companies will announce earnings during the week – dates are in the beginning of the newsletter. They are among the biggest companies in market capitalization, and their performance is a barometer for economic activity. Investors should keep a close eye to see if they meet their forecasted earnings. Whether they do or do not this could have a ripple effect throughout the whole market.
- Economic Calendar. The main indicators coming out are the PPI on April 13 and the retail sales on April 14. The PPI is the Producer Price Index, and is a group of indexes that represent the average movement in selling prices from domestic production over time – it is a measure of inflation from the point of view of the industries that make the products. Retail sales tracks consumer demand for finished products, and it also measures inflationary pressure.
Companies with expected dividend boost
- Petróleo Brasileiro S.A. Petrobras (PBR), from $0.381 to $1.219, ex-date at 04/14/2022
- HarborOne Bancorp (HONE), from $0.05 to $0.07, ex-date at 04/12/2022
- Oxford Industries (OXM), from $0.42 to $0.55, ex-date at 04/13/2022
- The PNC Financial Services Group (PNC), from $1.25 to $1.5, ex-date at 04/12/2022
- Watsco (WSO), from $1.95 to $2.2, ex-date at 04/13/2022
- Bank United (BKU), from $0.23 to $0.23, ex-date at 04/13/2022
- Bank OZK (OZK), from $0.30 to $0.31, ex-date at 04/13/2022
- Glacier Bancop (GBCI), from $0.32 to $0.33, ex-date at 04/11/2022
Main ex-dates this week
The ex-date is the date in which the stock begins to trade without a previously declared dividend or distribution. That is, you must be the owner of the stock on that date to receive its dividend.
Tuesday (04/12) – UBS Group (UBS)
Thursday (04/14) – Petrobras ADR (PBR)
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