Earnings:
- Microsoft reported strong earnings with 13% revenue growth and a significant increase in Azure cloud business.
- Google's earnings were also solid, beating expectations on both revenue and earnings per share.
Tech layoffs:
- Tech layoffs have significantly slowed down, contrary to earlier reports of widespread layoffs in the industry.
M&A activity:
- Chevron announced an all-stock deal to acquire Hess for $53 billion, indicating further consolidation may occur in the oil sector.
- Berkshire Hathaway has been consistently adding to its position in Occidental Petroleum when the stock drops below $60.
Gold and bitcoin:
- Gold prices are rising despite market challenges, potentially due to investors seeking safety amid uncertainty.
- Bitcoin is performing well, likely driven by similar factors as gold.
Energy Stocks:
- Energy stocks, such as ConocoPhillips and Chevron, have been impacted by higher interest rates.
- These stocks are considered interest rate-sensitive and have experienced significant declines.
- However, there may be an opportunity for these stocks to bounce back if interest rates stabilize or decrease.
- Investors who believe that interest rates are near their peak may consider buying energy stocks as an alternative to bonds.
Mutual Funds:
- Mutual funds have faced challenges in recent years due to the growing popularity of passive strategies like index ETFs.
- The bull market masked the vulnerabilities of mutual fund companies, which relied on market growth for revenue.
- However, with the end of the bull market and a shift in investor preferences towards cheaper passive strategies, mutual funds are facing difficulties attracting assets.
- It is becoming increasingly apparent that assets lost by mutual funds are not likely to return.
- To overcome this challenge, asset managers may need to explore new strategies such as acquiring firms in the RIA channel or becoming fintech providers.
Tax Loss Harvesting:
- Tax loss harvesting involves selling securities at a loss to offset capital gains and reduce tax liability.
- Seasonality plays a role in tax loss harvesting, particularly in October when mutual funds need to lock in realized gains and losses before their fiscal year ends on October 31st.
- During this time, investors may see opportunities for potential rebounds in stocks that have experienced significant losses (tax loss candidates) as selling pressure from mutual funds lifts come November 1st.
Mergers & Acquisitions (M&A):
- M&A activity has been increasing recently, driven by pent-up demand and a lack of appetite for IPOs.
- Companies are looking for realistic exits within the next six months due to limited options like IPOs or SPACs.
- There has been a surge in M&A deals globally across various sectors such as technology, consumer brands, pharmaceuticals, and energy.
- The increase in M&A deals may be a more viable exit option for private equity-backed startups and venture-backed companies compared to IPOs.
- The M&A market is larger than the IPO market, and recent data shows a significant volume of takeovers, particularly in October.
Gold:
- Gold has been trading inversely with real rates, making it less compelling when real rates are increasing.
- Despite real rates increasing this year, gold has remained strong and continues to hang high.
- There is an intuitive case for or against gold based on its relationship with real rates.
- Some investors find gold appealing due to its ability to act as a chameleon, but others question its value if real rates continue to rise.
- The strength of gold despite rising real yields and a strong dollar suggests that it may break out before the end of the year.
ConocoPhillips:
- ConocoPhillips is an energy stock that has been impacted by higher interest rates.
- It is considered an interest rate-sensitive stock and has experienced significant declines.
- However, there may be an opportunity for ConocoPhillips to bounce back if interest rates stabilize or decrease.
Chevron:
- Chevron is another energy stock that has been affected by higher interest rates.
- Like ConocoPhillips, it is considered an interest rate-sensitive stock and has seen notable declines.
- If interest rates stabilize or decrease, Chevron may have potential for recovery.
Morgan Stanley:
- Morgan Stanley's investment banking revenue was below $1 billion for the first time in a long time.
- The decline in revenue may be attributed to the challenging market conditions and the impact of higher interest rates.
- The wealth management division of Morgan Stanley has also faced challenges, with net new asset flow decreasing by 45% year over year.
- This decline in asset flow reflects a shift in investor behavior, as higher cash yields have reduced the urgency for investors to seek advice or allocate funds.
Seasonality and Tax Loss Harvesting:
- October is a significant month for tax loss harvesting, as mutual funds need to lock in realized gains and losses before their fiscal year ends on October 31st.
- During this period, selling pressure from mutual funds can create opportunities for stocks that have experienced significant losses (tax loss candidates) to rebound once the pressure lifts come November 1st.
- Investors should consider seasonality when deciding whether to sell or hold onto stocks that are down significantly.
Asset Managers' Strategies:
- Asset managers are facing challenges due to changing investor preferences towards cheaper passive strategies like index ETFs.
- To overcome these challenges, asset managers may need to explore new strategies such as acquiring firms in the RIA channel or becoming fintech providers.
- Acquiring RIAs can provide asset managers with access to distribution channels closer to clients and help them adapt to evolving investor demands.
Mutual Fund Challenges:
- Mutual funds have struggled in recent years as investors increasingly favor passive strategies over active management.
- Market growth during the bull market masked vulnerabilities within mutual fund companies that relied heavily on market performance for revenue generation.
- With the end of the bull market, it has become apparent that assets lost by mutual funds are unlikely to return without implementing new strategies or approaches.
M&A Activity:
- M&A activity has been increasing recently due to pent-up demand and a lack of appetite for IPOs among companies.
- The M&A market is larger than the IPO market, providing a more viable exit option for private equity-backed startups and venture-backed companies.
- Recent data shows a surge in M&A deals across various sectors, including technology, consumer brands, pharmaceuticals, and energy.