"Don’t Fight the Fed". How to benefit?
Markets took off on Wednesday with the rise of "only" 75 bps
We are in results season this week. The leading companies worldwide have presented how their businesses perform, and we have found several key data.
Google is not following in the footsteps of Snap and Twitter. Its revenue growth has indeed been the lowest in the last two years (13%). However, the results were very much in line with what shareholders expected. This gave the company some breathing room.
The most significant drop was in YouTube ads, which only grew by 4.8% compared to 14% in the previous quarter.
Google is one of the companies with the highest market entry barriers. Its search engine is currently unrivaled, and this makes it, without a doubt, an excellent long-term bet.
Another of the big players has also seen its revenue growth slow down (12%). Generally, growth companies are the first to fall. They are services that can often be dispensed with, which is why we see that the revenue of all these companies is much lower.
Microsoft's main fall has been in its video game business. The sale of equipment, specifically computers, has also declined. In addition, inflation in all sectors is causing their production costs to increase exponentially.
It is a company that has a large number of rivals in its core business, cloud storage. Therefore, the barriers to entry are not as high as in the case of Google. Although it is a safe bet in any portfolio, investing in an index is preferable to investing in Microsoft.
The boom in tourism has triggered this company to report one of the best results known to them.
Among the payment companies, it is probably the one that is one step ahead not only in terms of advantages but also in terms of innovation.
It is innovating very strongly in the cryptocurrency sector, which will undoubtedly put it one step ahead of the rest of its competitors.
What about the Fed?
"We believe we need a period of below potential growth to create some slack."
This Wednesday, the FOMC conference occurred, and a hike in US interest rates was announced. As is always the case when such announcements are made, the market has already discounted a much steeper hike in most cases.
After the meeting and press conference, the latest market data puts the most favorable odds on 100 bps of hiking left to do by the end of the year across three more FOMC meetings.
This has caused the major indices and cryptocurrencies to soar as the announcement was made. Investors’ appetite for risk has increased.
Last week we already said that the short term was very favorable for this type of asset.
In addition, we have taken the opportunity to increase our exposure to an asset class that is very likely to give us large returns in the short term.
Powell made a comment that could have a significant impact on the markets in the coming months: