Market Wrap: Recession fears (Friday 29 April, 2022)
Welcome to this week’s Market Wrap. Downward pressure on prices across the main indices spilled into trading on Monday and Tuesday, leaving most regions finishing the month either flat or negative.
Index changes
This Week | 1 Month | 1 Year | |
FTSE 100 | +1.9% | -0.1% | +8.0% |
FTSE AIM All Share | -1.0% | -2.3% | -19.8% |
S&P 500 | -0.2% | -6.3% | +2.5% |
FTSEuroFirst 300 (ex-UK) | +1.0% | -3.3% | +1.2% |
S&P/ASX All Ordinaries | +1.6% | -0.3% | +5.1% |
Source: Stockopedia, London Stock Exchange
Financial headlines
The US S&P 500 is down more than 10% year to date, crossing the threshold to bear territory. It was another big week for Q1 earnings reports, with mixed news from high profile names like Apple (NSQ:AAPL), Amazon (NSQ:AMZN) and Meta Platforms (NSQ:FB).
Beyond the numbers, there’s a clear sense that even premium-product mega stocks like Apple are feeling the heat from supply chain issues, inflationary pressures and the Ukraine/Russia war. Certainly there appears to be increasing concerns about the prospect of recession as inflation seemingly runs away.
Apple is a tech giant with the advantage of being a luxury brand in many ways, and this gives it some defensive clout. Year-on-year Q1 sales were up 9% to $97.3bn, with earnings per share coming in at $1.52 against forecasts of $1.43.
As a quick aside, I saw a note from Morgan Stanley on Wednesday saying that nearly 80% of the companies that had reported first-quarter earnings had beaten estimates.
One that didn’t beat estimates was Amazon, which posted its first quarterly loss since 2015 plus news of slowing growth and a $7.6bn loss on its investment in the EV firm Rivian. By contrast, Meta Platforms did surprise to the upside and my colleague Megan wrote a great assessment of its quality and value strengths here.
Elsewhere, Emanuel Macron secured victory, and a second term in office, in the French presidential election last Sunday. Financial headlines across Europe this week have been dominated by cost of living prices, particularly skewed to rising energy costs. Russia’s ‘closing of the taps’ on gas pipelines to Poland and Bulgaria was a major story and pushed gas prices even higher across the continent.
In the UK, new business data suggests - as one might expect - that confidence is collapsing. A CBI Industrial Trends survey on Monday reported that business optimism in Q1 fell at the sharpest rate since April 2020, with orders slowing and costs rising. A second report mid-week said that retail sales in the year to April had also been ‘disappointing’.
The follow-through was that industrial and retail stocks came under pressure. Some of the highest relative price weakness in the FTSE All Share this week was found in stocks like Aveva (LON:AVV - industrial software), Ocado (LON:OCDO - retail/ technology), Dr Martens (LON:DOCS - footwear), Rolls Royce (LON:RR. - industrial engineering) and Ashtead (LON:AHT - industrial hire equipment).
Factor moves and screening
On a brighter note, when you filter the UK FTSE All Share for stocks with a 50-day moving average price that’s rising above the 200-day moving average, there are nearly 100 securities showing this bullish ‘golden cross’ signal. Sector-wise, financials and industrials make up the biggest proportions.
Dig into the results, and it’s clear that the top movers remain those that are less sensitive to domestic economic conditions: predominantly oil & gas, energy generation and supply, mining and materials supply. Note that John Menzies (LON:MNZS), the logistics group, is currently in a takeover situation. You can find the screen here
Name | Mkt Cap £m | 50dMA / 200dMA % | Price vs 52w High % | Stock Rank | Sector |
546.0 | 153.44 | -1.82 | 92 | ||
466.0 | 132.38 | -18.2 | 77 | ||
3,232.0 | 127.83 | -4.30 | 59 | ||
2,334.1 | 124.15 | -2.76 | 90 | ||
63,616.4 | 123.54 | -10.5 | 96 | ||
2,100.9 | 122.95 | -8.88 | 31 | ||
46,193.3 | 119.79 | -19.5 | 99 | ||
4,738.3 | 119.38 | -5.17 | 97 | ||
607.3 | 118.99 | -13.1 | 94 | ||
5,603.4 | 118.78 | -8.61 | 92 | ||
23,057.4 | 118.28 | -5.87 | 97 | ||
164,169.1 | 117.95 | -3.30 | 98 |
* In a takeover situation
Final thought…
If you’re after a distraction this weekend, you could do worse than catch up with this chat between the inimitable Jim O’Shaughnessy and William Green.
Jim’s Infinite Loops podcast always serves up interesting conversations, not least because the man himself is such an investing legend and all-round nice guy.
William is a British journalist and author of Richer, Wiser, Happier: How the World's Greatest Investors Win in Markets and Life”, which looks at the inner investing workings of investors ranging form Jack Bogle to Peter Lynch. His experience of those interviews results in some interesting views on the essence of investing.
Have a great weekend!
Disclaimer
This is not financial advice. Our content is intended to be used and must be used for information and education purposes only. Please read our disclaimer and terms and conditions to understand our obligations.
5 comments
Oil & Gas Related Equipment and Services are an Industry Group on a roll though
Biotechnology & Medical Research appear to be the Industry Group in the doldrums. Investment trusts specializing in this group and that are at a big discount might be worth investigating for the long term...
Maybe..but Biotech Growth Trust (LON:BIOG) (for example) is still higher than it's pre-covid rating.
Biotech Growth Trust (LON:BIOG) not sure which rating you mean........share price is much lower now than pre-covid....it's discount is around 8%...looks quite interesting
Not really, it was 1000p in Fed 2020. It’s down over 50% from its peak in Jan 21, at 1750p.