News & Insight • Weekly Newsletters

23 August 2024 | William Buckhurst | Charlie Todd

That Was The Week That Was

MACRO

• We don’t know what was more expected – Oasis reuniting or Sir Keir announcing the past Government are to blame for the upcoming tax rises… Don’t Look Back In Anger!
• Over the pond the US rate setters look to be pivoting to rate cuts as they met at their annual symposium at Jackson Hole, Wyoming. Chair Jay Powell said that “the time had come for policy to adjust” as he warned downside risks to the labour market have increased
• US initial jobless claims rose by 4,000 to 232,000, showing that the labour market was softening whilst the composite PMI data for US Services and Manufacturing edged down to 54.1 – which is still pretty strong
• The preliminary Eurozone Manufacturing PMI was 45.6 vs 45.8 expected with the Services PMI of 53.3 above consensus estimates (Olympics?) and the prior month, taking the Composite PMI to 51.2, higher than forecast
• A bar of gold is now worth $1m. With the gold price hitting $2,500 per troy ounce and a gold bar weighing around 400 ounces – well, even we can do the math…

COMPANY NEWS

• JD Sports beat expectations as it reported stronger-than-expected sales of replica England football shirts. While sales at established JD Sports shops in the UK fell by 0.8% in the three months to 3 August, that was a big improvement from the 6.4% decline in the last quarter
• Tough going for Snowflake, the data cloud experts, who not only beat on the top and bottom line but also on future guidance; however, the shares fell 15% as analysts called out a deceleration of growth. Intuit on the other hand beat expectations but offered out poor guidance
• The uranium market was particularly strong as Kazatomprom, the world’s largest producer and seller of natural uranium, reduced its production target
• One of the darlings of the market during lockdowns was Peloton, which has lost 97% of its value since the December 2020 highs. However, the recent results were better than expected, sending the shares up 35%
• Medtronic reported $8bn of worldwide revenue in Q1 and nudged up guidance. Its shares followed suit

MARKET SUMS

A new research paper has calculated that the majority (51.6%) of US stocks produced negative cumulative returns over the very long-term. Hendrik Bessembinder of Arizona State University has analysed all 29,078 US stocks that have existed since 1926 and established that more than half have lost money over the last century, highlighting how narrow the leadership of US equities has been over the very long-term. The best performing stock identified by Bessembinder? Tobacco giant, Altria Group: $1 invested on 31^st December 1925 would be worth $2.65m today. Other long-term winners have included IBM, Coca Cola, and Bristol Myers Squibb

TECH WEEK

Snippets from Benedict Evans, whose influential weekly newsletter dives into the deep world of technology, on search engines and the threat from AI this week:

“Everyone uses Google because it has the best results, and it has the best results because everyone uses it, and hence it has the money to invest in getting even better results. That is compounded by the scale of the infrastructure needed to index and analyse the entire web (Apple estimated $6bn a year for it to match Google on top of its existing search and indexing spending)”.

“Satya Nadella claimed that Microsoft has invested $100bn in search to date, yet Bing has only 5% of US search traffic, and both its results and its revenue-per-query are worse. It’s stuck on the wrong side of that virtuous circle.”

“But one rather deterministic lesson we might draw from all the previous waves of tech monopolies is that once a company has won, and network effects have become self-perpetuating and insurmountable, then you don’t beat that by making the same thing but slightly better and getting a judge to give you an entry point. You win by making the old thing irrelevant. Google didn’t build a better PC operating system or a Win32 office suite, Facebook didn’t do better search, and Apple didn’t do a better Blackberry. And OpenAI got 100m users in two months without going to a judge.”

THIS WEEK IN HISTORY

• 1976: Vanguard launches the first retail index fund, called the First Investment Trust
• 1998: the Russian government devalued the Ruble and defaulted on domestic debt while declaring a moratorium on the repayment of foreign debt

MARKET DATA

As of 23^rd August 2024. Source: InFront

This publication has been produced by Vermeer Investment Management Limited (VIM) trading as Vermeer Partners. It is provided for information purposes only. VIM makes no express or implied warranties and expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to any data included in this publication. VIM will not treat unauthorised recipients of this publication as its clients. Prices shown are indicative and VIM is not offering to buy or sell or soliciting offers to buy or sell any financial instrument.

Without limiting any of the foregoing and to the extent permitted by law, in no event shall VIM, nor any of its officers, directors, partners, or employees, have any liability for (a) any special, punitive, indirect, or consequential damages; or (b) any lost profits, lost revenue, loss of anticipated savings or loss of opportunity or other financial loss, even if notified of the possibility of such damages, arising from any use of this publication or its contents.

Other than disclosures relating to VIM, the information contained in this publication has been obtained from sources that VIM believes to be reliable, but VIM does not represent or warrant that it is accurate or complete. VIM is not responsible for, and makes no warranties whatsoever as to, the content of any third-party website referred to herein or accessed via a hyperlink in this publication and such information is not incorporated by reference.

The views in this publication are those of the author(s) and are subject to change. VIM has no obligation to update its opinions or the information in this publication. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the client who receives it. Any securities discussed herein may not be suitable for all investors. VIM recommends that investors independently evaluate each issuer, security or instrument discussed herein and consult any independent advisors they believe necessary. The value of and income from any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results.

This material has been issued and approved for distribution in the UK by VIM. ©2024 Vermeer Investment Management Limited. All rights reserved. No part of this publication may be reproduced or redistributed in any manner without the prior written permission of VIM. VIM is authorised and regulated by the Financial Conduct Authority (FRN: 710280) and is incorporated in England and Wales (company number: 09081916).