TRANSCRIPT: Market Update [apr’21] Tech surges, United States stimulus, JP Morgan and the Super

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Welcome back to Compare Return. In this week’s video we’re bringing you our April market review. There were three big stories this month. Tech profits were being reported, that’s all the big players like Google, Amazon and Facebook. We’ve also seen JP Morgan scoring an own goal in Europe, and we’ve also seen Biden’s 4 trillion dollar stimulus package in America. 

Let’s get started. As always, this isn’t meant to be taken as financial advice so please seek a professional or even better, please educate yourself. 

Okay, so let’s look at the markets top headline figures for the month. The NASDAQ, which is the tech composite, is up 7.2 percent, the S&P 500 is up 5.2 percent, the world index for the ETF world is up 5 percent, Euro stocks are up 3.8 percent, and the FTSE is up 3 percent for the month. So, there’s definitely profits in the tech sector. 

If you know me or you’ve been watching any of my videos, you’ll know how much I love tech and the tech sectors and this month’s profit report really tells you why. If we go back to the last video, it goes over why you should always be invested and the other video from last month talks about the dip in the tech sector. So, always be invested. Or if there’s a dip and you see a dip in the tech sector – what does that mean? You should have seen that as a buying opportunity. So, if you’re not paying attention to these market movers, or even worse, the person who you’re paying to look after your money isn’t paying attention to these then you really need to start doing that. And here’s why it’s so important.

The tech giants smashed Wall Street projections with revenues at absolutely crazy levels. The reason for this is we saw more people online. The pandemic winners are a lot of the tech sectors, they did very well and here’s just how well they did. Apple had 89.6 billion in record-breaking revenue in Q1 and it doubled its profits to 23.6 billion dollars. This is off the back of the 5G handsets being released and obviously a lot more people being online nowadays. These aren’t small companies (that’s the other thing to keep in mind). These are mature tech companies so it’s absolutely mind-bending to see a large-cap mature company double its profits. It’s just unheard of.

If you’re going to be an investor and pick your own stocks, you need to start listening to the biggest company’s conference calls. That’s one of my tips for today. Start getting your head into the conference calls. You can download the transcripts so you don’t even need to listen to them. It’s super easy. You’ll also get info from companies that are in infrastructure, like UPS and GE. This’ll give you so much information and insight into what’s going on in the investment world. They’ll tell you where the market demand is. The areas that the likes of GE and UPS are paying attention to is where the demand is going to be. So, once again if you’re going to be looking after your own money, you have to be spending time on this and if your financial planner or advisor doesn’t know about this then, what are they doing? That’s where you need to be paying attention. 

We’re actually going to give you a few little tips today. Flying in the face of regulators trying to clamp down on it, Facebook actually posted a 26-billion-dollar revenue – shattering Wall Street expectations. Expectations and projections are already high for Facebook, but they’ve just come out and absolutely stomped it. What I’ve done for you this week is actually put in a link to the Facebook investor relations website where you can download the Q1 report. After you’ve watched this video, go straight to the description where you can download one of the reports and get reading. 

Google, or Alphabet, recorded a revenue of 55.31 billion dollars. That’s up 34 billion from a year earlier. Their net profit more than doubled to 17.93 billion dollars so we’re seeing the profits increasing as well, which tells me there’s better efficiencies going on inside those companies. It’s the third straight quarter of record profits for Alphabet. It must be nice to be in the largest new sector we’ve ever seen. That’s digital advertising – and that’s where Google is. Here’s where it gets really crazy, they just posted a 50-billion-dollar stock buyback. Can you imagine the conversation going on in that boardroom? “Hey guys. should we have a 10 billion dollar – 20-billion-dollar buyback – 30 billion dollar buy back? Ah, stuff it! Let’s do a 50-billion-dollar buyback!” That’s unheard of. To put that in perspective, that’s larger than 350 of the top 500 companies in the S&P 500. It’s also the cheapest company in all the FAANG’s. It’s the cheapest one and they’ve already posted a 50 billion buyback. This is why I love the tech sector.

Microsoft, one of the oldest and the biggest players in the sector, reported that its third quarter sales grew at one of the strongest rates in years. It’s set to cross two trillion dollars in market value. That’s one company! Two trillion dollars! Its revenue rose to 41.7 billion dollars in the first fiscal quarter – up 19 percent from a year earlier. It’s the biggest quarterly rise since 2018 and profits jumped 44 percent to 15.5 billion dollars. That’s probably off the back of computer sales – the surface tablets and all that. For a company as big as Microsoft to be posting a 44 percent jump in profits is absolutely crazy.

Right guys! Fast play round! Top trending tickets – and here we go! Apple, Facebook, Qualcomm, Teledoc, Shopify, Nokia, Spotify Technologies, Clover Healthcare Investments, NASDAQ, Amazon. There are just a few tickets there for you to be paying attention to.

Okay, on to our next story. The financial football fiasco, or how JP Morgan scored an own goal. Now I’m sorry but I can’t help but laugh at this story. If you’re a big bank and you want to do something to rally the whole world against you, maybe pull off the GFC (if everyone remembers the 99 percent – shut the banks down – etc). Well, I think this one actually topped it. We had JP Morgan over in Europe getting the absolute wrath of the entire football community against them. This has got to go down as one of the worst banking decisions ever and here’s how it played out. The proposal was to put together a super league – sounds great right? The problem happens to be that this super league was going to be a contender against the UEFA championship league. There’s already a league, and that league has Europe’s top teams that compete every year. The kicker here is, and why people are so upset, is that league has a qualifier based on their domestic success. So, to get into the UEFA league you have to be a qualifying winning team. When they did a poll on this, 89 percent of fans said that the main motivation for this was just a cheap dirty money grab by JP Morgan. How much money did JP Morgan want to face for this? It was a four billion dollar deal they were trying to put together with these clubs. What was the end result of all this? Well, JP Morgan actually came out and issued a public apology as follows: “We clearly misjudged how this deal would be viewed by the wider football community and how it might impact on them in the future.” A spokesman from the bank said, “we will learn from this.” Yep, you’re definitely going to learn from that one – oops, bit of a social faux pas there.

Okay, on to our third story for the month, President Biden’s four-trillion-dollar stimulus plan which has come in two halves so far. The first one we saw back in March which was the 2.3 trillion dollar “Building America” plan. That was all based around infrastructure and now we’ve seen the family plan come out which is a further 1.9 trillion dollars. From a finance perspective, this is really important to pay attention to. What does President Biden in America having a stimulus plan for Americans have to do with the price of fish in China? Well, when the American government is injecting money into sectors, those sectors are said to have more cash. More cash equals more sales equals more profit, so it’s really important for you at home to be paying attention to exactly where these stimulus bills are going to. For our second free giveaway for this video, I’ve actually put another link in the description to a New York Times article. Unfortunately, that article is behind a pay wall, but you can view it once for free or disable an ad blocker. The reason why I’m showing you this article in particular is its fantastic infographic. The infographic shows you in exact sizes where all these funds have gone. It’s a really good visual snapshot of what’s going on in the market. Biden wants to put a further four trillion dollars into the market (just who does he think he is? How is he going to pay for this?) – let’s go to our favourite right wing news outlets saying “Crazy! Radical! Unheard of!” What we’re talking about here is a tax raise. He plans to pay for this over a 15-year period by doing two things. One, is increasing the income tax levels of the top-top earners in America, and number two is to increase the corporate tax rate. If you have a look at the history of corporate tax rates and of income tax at the highest marginal rates – that’s all you need to know. Where we are today in 2020, they are not at all-time highs. Especially looking back to the ’50s and ’60s. Corporate tax and income tax have been much higher and that’s how Biden plans to pay for it. 

The buildings and utilities (in the plan) are certainly going to be a boost to that sector which is already said to be huge for 2021. There has been a dip in home purchases for Q1 and 2021, but that doesn’t mean that the sector isn’t growing. The reason for the dip in purchases is that there’s just not enough houses being built. If you have a quick look at timber (which I’ve talked about a few times), that’s a good key indicator of what’s going on in that sector. What this speaks to more broadly is Biden’s vision where he plans to make a big push into governmental spending. Previous governments, both Republican and Democratic, always have left the government’s role in the economy up to the economy. They thought that companies and the broader economy at large were the best people to deal with the money. You know… no one knows business better than business and that’s been the traditional view – to let the corporate sector look after itself. 

Biden seems to see things a little bit differently. He seems to think the government can have a bigger role in the economy and government spending can actually stimulate the economy a lot. Now this isn’t unheard of, we saw Kevin Rudd in Australia do this through the GFC to questionably fantastic results. That’s another thing to pay keen attention to – what Biden sees his government’s role being in the economy.

Let’s dig in a little bit deeper into this stimulus. Where’s the money going? What are we going to be seeing? I noticed that 80 billion dollars is a package going to the IRS to increase their power, so it seems like things are starting to finally heat up a little bit in the tax sector in the US. We don’t know how this is going to look, it may be closing tax loopholes, it may be higher corporate tax but one thing he’s certainly doing is giving a little bit more money to the IRS to arm them. There’s also going to be 174 billion dollars going to incentivize the purchase of EV’s. If you’re an EV company or you support the EV sector that’s going to be huge, so get investing. The buildings and utilities certainly saw a boost – that’s already been huge, so pay attention to that. 

That’s been the monthly market review once again. I’ve given you two documents that you can go into the description and have a look at or download.

What am I trying to tell you? Well as we’ve seen, the tech sector took a big dip last month. Guess what? Profits came out this month and that was a key buying indicator you should have been paying attention to. This month, if you’re going to be doing any research, dig into the UPS conference calls, dig into Facebook data, dig into where the stimulus money is going. It’s your retirement and it’s your money so make sure you are really putting the effort. 

Thank you very much for watching. As always, like and subscribe Compare Return. We’re trying to connect expats with experts. Have a good month and see you next time.

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