The first trading week of the year is coming to an end and as we've already said, it hasn't been that boring as many have supposed. As we're after Fed minutes and German and Spanish inflation prints, but still before Eurozone inflation and NFP, we reached out to Santa Zvaigzne-Sproge, CFA, Head of Investment Advice Department at Conotoxia Ltd. to deliver you with her view on the most recent events like mentioned macro events and striking performance of popular stocks like Tesla, Amazon and Apple.
Spain has generally faced lower inflation than other EU member states during this inflationary period - it peaked in July at 10.8% and has since lowered to 6.8% in November, while it was still above 10% in the same period in the EU. Additionally, Spain is in a more advantageous situation in terms of geographical location and heating needs during the winter season and the country has introduced various reliefs such as limits on the increase of rents and energy bills pushing the inflation lower. Furthermore, while Spain’s consumer prices rose 5.8% (lower than before), its core inflation rose to 6.9% (from 6.3% a month ago), meaning that it may not be safe to say that Spain has retained its inflation.
Germany may be a better indicator for the whole Eurozone, although it is in a better position than many other EU member states in terms of dealing with inflation (such as the newly introduced solidarity surcharge to finance the energy price cap, which not only supports the government’s budget to cover the energy price spikes for the households but also keeps companies’ profits lower and therefore limiting the “fuel” for further inflation).
If we consider that one of the key inflation drivers in the EU is heating and energy prices, inflation in the Eurozone for the following months may largely be determined by how cold or warm the following months will be. Considering that heating will be needed for a large part of the EU for at least 3 more months, the ongoing geopolitical conflict leading to food supply difficulties, and the still decreasing unemployment rates in both the EU and Eurozone, there may not be any strong reason to believe that the Eurozone’s inflation data is headed for particular improvement.
The Federal Reserve’s minutes this week perpetuated the already expressed opinion of a restrictive policy stance, which may be confirmed by higher-than-expected non-farm payroll data on Friday. It would be useful to pay attention to the NFP data not only from the actual vs forecast perspective but also current vs a previous couple of months as well as revision of actual data perspectives – increases in both of these measures may be considered as another indicator of still overheating economy.
I would like to separate Tesla from the rest of the group as the company is considerably more unpredictable and seems to largely depend on Elon Musk’s activities. As investors are currently looking at safer investments, we may see further selloffs of Tesla stocks. Technically, besides the 100 USD level, the one last major support left for the stock price is its 100-month moving average currently standing at 88 USD.
Amazon, Apple, and Alphabet stocks currently seem largely dependent on the overall macroeconomic sentiment and the Fed’s possible and actual moves in the following months. Based on the hawkish stance still held by the Fed officials, we may expect to see further lows also for these companies, but for different reasons in comparison to Tesla.
Furthermore, Amazon’s stock price touched what seems to be an important support level on 28 December (closed at 81.82 USD) and since then has started moving higher. It is worth monitoring its further price movements and looking for a pivot in the current trend. Amazon also has fallen the most among these three stocks and currently trades at a 1.5x price to next year’s sales ratio. For comparison, Alphabet and Apple are still trading at 4x and 5x price to next year’s sales ratio accordingly.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement, or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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