Business

What’s next for markets after Fed’s 4th straight jumbo rate hike

Published

2 years ago

November 2, 2022

What’s next for markets now that the Federal Reserve has delivered its fourth and possibly final jumbo rate increase of 75 basis points?

Well, a lot, actually.

A sometimes tumultuous third-quarter earnings season isn’t over yet. A packed economic-data calendar in the coming weeks includes key readings on inflation and the labor market. On top of that, the U.S. midterm elections could result in Democrats losing control of one, or both, chambers of Congress.

MarketWatch spoke with several market gurus about what investors should watch out for, and what it all might mean for their portfolios.

Inflation, jobs data could force the Fed to keep rates ‘higher for longer’

The Fed may be penciling in another rate increase of 50 basis points at its December meeting, but any sign that inflation isn’t trending toward the central bank’s target still could send stocks reeling and Treasury yields surging, market strategists said.

Indeed, stocks initially rallied after the Fed’s Wednesday policy statement signaled a slower pace of rate increases was in the offing. But indexes ended the day down sharply after Chairman Jerome Powell, in his news conference, said it was premature to “pause” rate hikes and that the terminal — or peak — interest rate was likely to be higher than policy makers had anticipated in September.

Although headline inflation has softened from the fastest pace in more than 40 years, core prices are still accelerating at an uncomfortable rate, and wage growth remains a “mixed bag,” Powell said.

“A lot of what the Fed ultimately does will depend on what happens with inflation,” said Jack Ablin, founding partner and chief investment officer at Cresset Capital.

The consumer-price index for October is due out on Nov. 10, followed by the personal-consumption expenditures index, the Fed’s preferred barometer of inflation pressures, on Dec. 1.

But there’s still plenty to learn about inflation from the October jobs report due out Friday, including its reading on average hourly earnings.

“I think certainly the payrolls number is important, and it all circles back to what it means for inflation,” Ablin said.

Bottom line: Any further indication that the Fed will need to keep interest rates “higher for longer” to combat inflation could exacerbate the weakness in both stocks and bond prices, which move inversely to yields, seen so far this year.

“The increased momentum of inflation sets a high bar for the Fed to end the current rate hike cycle and an even higher one to begin cutting rates,” said Bill Adams, chief economist for Comerica Bank.

Midterms and the return of gridlock

Even if Democrats manage to hang on to both chambers of Congress, investors will likely breath a sigh of relief once Tuesday’s U.S. midterm elections have ended.

“We frequently see stocks rally after the election no matter what the outcome is,” said Callie Cox, U.S. investment analyst at eToro.

Some investors think Republicans retaking the House or the Senate could be bullish for stocks, said Octavio Marenzi, CEO of markets-focused management consulting firm Opimas.

According to Marenzi, a divided Congress would likely lead to more gridlock, which in turn would mean less inherently inflationary fiscal spending.

“Markets might look favorably on a Republican takeover of at least one of the houses [of Congress],” he said.

Earnings remain important

Corporate earnings growth has held up surprisingly well so far this year despite the drumbeat of guidance cuts and ominous rhetoric from corporate executives, said eToro’s Cox.

But the third-quarter earnings season isn’t over yet, which can mean more unpleasant surprises, like what investors saw when Alphabet Inc.
GOOG,
-3.79%,
Meta Platforms Inc.
META,
-4.89%
and Amazon.com Inc.
AMZN,
-4.82%
reported earnings last week.

Amazon, Meta and Alphabet now require ‘perfection,’ analyst says in Big Tech ‘autopsy’

Investors are still waiting on earnings from more than 150 S&P 500 companies, according to FactSet. Beyond that, there’s also the risk that earnings guidance cuts could weigh on equity prices, market strategists said.

Morgan Stanley Chief U.S. Equity Strategist and Chief Investment Officer Michael Wilson said in recent weeks that guidance cuts may not arrive until companies report fourth-quarter earnings early next year, if at all.

Right now, the S&P 500 is expected to achieve full-year earnings growth of 5.6% in 2022, and 3.9% in 2023, according to Sam Stovall, chief investment strategist at CFRA. That has come down slightly since Sept. 30, when investors anticipated full-year growth of 6.3% and 7%.

A Russian winter offensive could complicate the outlook for markets

The Ukrainian military lately has succeeded in keeping Russian forces at bay. But that could change if Russia launches a winter offensive, according to Marenzi.

Russia already has been calling up thousands of troops and preparing to send them to the front lines.

Historically speaking “winter has been their friend,” Marenzi said about the Russian military. “And I think it might end up being their friend again.”

A Russian advance in Ukraine would likely hurt risky assets like stocks, Marenzi said, while benefiting traditional havens like the dollar, Treasurys and gold
GC00,
-0.90%.

Speaking of stocks, the major U.S. indexes finished Wednesday sharply lower after a volatile session.

The Dow Jones Industrial Average
DJIA,
-1.55%
tumbled 505 points, or 1.6%, to end at 32,147.76 after briefly topping 33,071 at the session’s high, according to FactSet. The S&P 500 index
SPX,
-2.50%
fell 2.5% and the Nasdaq Composite Index
COMP,
-3.36%
closed 3.4% lower, the biggest daily drop for both indexes since Oct. 7.

Treasury yields
TMUBMUSD02Y,
4.607%
also climbed after experiencing similar levels of volatility. The yield on the 2-year note rose 3 basis points to 4.568% based on 3 p.m. Eastern Time levels, its highest level in two weeks.

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Business

What Difference Will You Make to an Employer?

Published

10 hours ago

October 21, 2024

Nick Kossovan

It’s common knowledge that companies don’t hire the most qualified candidates. Employers hire the person they believe will deliver the best value in exchange for their payroll cost.

Since most job seekers know the above, I’m surprised that so few mention their Employee Value Proposition (EVP). Most job seekers list their education, skills, and experience without substantiating them and expect employers to determine whether they can benefit their company; hence, most resumes and LinkedIn profiles are just a list of opinions—borderline platitudes—that are meaningless and, therefore, have no value. Job seekers need to better explain, along with providing evidence, how they’ll contribute to an employer’s success.

Employers don’t hire opinions (read: talk is cheap); they hire results.

You’re not offering anything tangible when you claim:

I’m a great communicator.
I’m detail oriented.
I’m a team player.

Tangible:

“At Global Dynamics, I held quarterly town hall meetings with my 22 sales reps, highlighting our accomplishments, identifying opportunity areas, and recognizing outstanding performers.”
“For eight years, I managed Vandelay Industries IT department, overseeing a staff of 18 and a 12-million-dollar budget while coordinating cross-specialty projects. My strong attention to detail is why I never exceeded budget.”
“While working at Cyberdyne Systems, I was part of the customer service team, consisting of nine of us, striving to improve our response time. Through collaboration and sharing of best practices, we reduced our average response time from 48 to 12 business hours, resulting in a 35% improvement in customer feedback ratings.”

These examples of tangible answers provide employers with what they most want to hear from candidates but rarely do; what value the candidate will bring to the company. Typically, job seekers present their skills, experience, and unsubstantiated opinions and expect recruiters and employers to figure out their value, which is a lazy practice.

Getting hired isn’t based on “I have an MBA in Marketing and Sales,” “I’ve been a web designer for over 15 years,” “I’m young, beautiful and energetic,” blah, blah, blah. Likewise, being rejected isn’t based on “I’m overqualified,” “I’m too old,” “I don’t have enough education,” blah, blah, blah. Getting hired depends entirely on showing employers that you can add value and substance to their company; that you’ll serve a purpose.

When you articulate a solid value offer, the “blah, blah, blah” doesn’t matter. Job seekers focus too much on the “blah, blah, blah,” and when not hired, they say, “It’s not me, it’s…” The biggest mistake I see job seekers make is focusing on the “blah, blah, blah”—their experience and education—believing this is what interests employers. Hiring managers are more interested in whether you can solve the problems the position exists to solve than in your education and experience.

Not impressive: Education

Impressive: A track record of achieving tangible results.

You aren’t who you say you are; you are what you do.

If you want to be somebody who works hard, you have to actually work hard. If you want to be somebody who goes to the gym, you actually have to go to the gym. If you want to be a good friend, spouse, or colleague, you have to actually be a good friend, spouse, or colleague. Actions build reputations, not words.

The biggest challenge job seekers face today is differentiating themselves. To stand out and be memorable, don’t be like most job seekers, someone who’s all talk and no action. Any recruiter or hiring manager will tell you that the job market is heavily populated with job seekers who talk themselves up, talk a “good game” about everything they can “supposedly” do, drop names, etc., but have nothing to show for it.

More than ever, employers want to hear candidates offer a value proposition summarizing what value they bring. If you’re looking for a low-hanging fruit method to differentiate yourself, do what job seekers hardly ever do and make a hard-to-ignore value proposition.

Increase sales: “Based on my experience managing Regina and Saskatoon for PharmaKorp, I’m confident that I can increase BioGen’s sales by no less than 25% in Winnipeg and the surrounding area by the end of 2025.”
Reduce cost: “During my 12 years as Taco Town’s head of purchasing, I renegotiated contracts with key suppliers, resulting in 15% cost savings, saving the company over $450,000 annually. I know I can do the same for The Pasta House.”
Increase customer satisfaction:“During my time at Globex Corporation, I established a systematic feedback mechanism that enabled customers to share their experiences. This led to targeted improvements, increasing our Net Promoter Score by 15 points. I can increase Dunder Mifflin’s net promoter score.”
Save time: “As Zap Delivery’s dispatcher, I implemented advanced routing software that analyzed traffic patterns, reducing average delivery times by 20%. My implementation of this software at Froggy’s Delivery can reduce your delivery times by at least 20%, if not more.”

If you want to achieve job search success as soon as possible, structure your job search with a single thread that’s evident and consistent throughout your résumé, LinkedIn profile, cover letters and especially during interviews; clearly convey what difference you’ll make to the employer.

_____________________________________________________________________

Nick Kossovan, a well-seasoned veteran of the corporate landscape, offers “unsweetened” job search advice. You can send Nick your questions to artoffindingwork@gmail.com.

Business

Netflix’s subscriber growth slows as gains from password-sharing crackdown subside

Published

4 days ago

October 17, 2024

Anne Joseph

Netflix on Thursday reported that its subscriber growth slowed dramatically during the summer, a sign the huge gains from the video-streaming service’s crackdown on freeloading viewers is tapering off.

The 5.1 million subscribers that Netflix added during the July-September period represented a 42% decline from the total gained during the same time last year. Even so, the company’s revenue and profit rose at a faster pace than analysts had projected, according to FactSet Research.

Netflix ended September with 282.7 million worldwide subscribers — far more than any other streaming service.

The Los Gatos, California, company earned $2.36 billion, or $5.40 per share, a 41% increase from the same time last year. Revenue climbed 15% from a year ago to $9.82 billion. Netflix management predicted the company’s revenue will rise at the same 15% year-over-year pace during the October-December period, slightly than better than analysts have been expecting.

The strong financial performance in the past quarter coupled with the upbeat forecast eclipsed any worries about slowing subscriber growth. Netflix’s stock price surged nearly 4% in extended trading after the numbers came out, building upon a more than 40% increase in the company’s shares so far this year.

The past quarter’s subscriber gains were the lowest posted in any three-month period since the beginning of last year. That drop-off indicates Netflix is shifting to a new phase after reaping the benefits from a ban on the once-rampant practice of sharing account passwords that enabled an estimated 100 million people watch its popular service without paying for it.

The crackdown, triggered by a rare loss of subscribers coming out of the pandemic in 2022, helped Netflix add 57 million subscribers from June 2022 through this June — an average of more than 7 million per quarter, while many of its industry rivals have been struggling as households curbed their discretionary spending.

Netflix’s gains also were propelled by a low-priced version of its service that included commercials for the first time in its history. The company still is only getting a small fraction of its revenue from the 2-year-old advertising push, but Netflix is intensifying its focus on that segment of its business to help boost its profits.

In a letter to shareholder, Netflix reiterated previous cautionary notes about its expansion into advertising, though the low-priced option including commercials has become its fastest growing segment.

“We have much more work to do improving our offering for advertisers, which will be a priority over the next few years,” Netflix management wrote in the letter.

As part of its evolution, Netflix has been increasingly supplementing its lineup of scripted TV series and movies with live programming, such as a Labor Day spectacle featuring renowned glutton Joey Chestnut setting a world record for gorging on hot dogs in a showdown with his longtime nemesis Takeru Kobayashi.

Netflix will be trying to attract more viewer during the current quarter with a Nov. 15 fight pitting former heavyweight champion Mike Tyson against Jake Paul, a YouTube sensation turned boxer, and two National Football League games on Christmas Day.

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Business

All Magic Spells (TM) : Top Converting Magic Spell eCommerce Store

Published

4 days ago

October 17, 2024

Sven Eggers

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