19 September 2022 | Weekly Snapshot

Did you know?

The number of multiple job holders has reached a record high in the June quarter (900,000) – a sign that more people are taking on more work just to make ends meet. (Source ABS).

Market Movements

Australian Share Market (ASX200) – down 2.25% on negative offshore leads. The Health Care sector (-4.06%) led the declines, primarily due to the Ramsay Health Care takeover offer being pulled. Industrials (-3.6%) and Consumer Staples (-3.09%) were the next worst while Energy (-0.46%), Utilities (-0.47%) and Financials (-0.54%) fared the best.
Last week saw the first rise in the Australian unemployment rate in 10 months from the 48-year low of 3.4% to 3.5%. This will help to support the view that the RBA will be able to slow the pace of tightening and only increase by 25 basis points next month. Speaking at the AFR property summit the RBA head of domestic markets said that the risks associated from the effect of higher rates on property prices appeared to be contained given the low leverage for residential and commercial property.

US Share Market (S&P 500) – down 4.77%, with the Dow (-4.13%) and Nasdaq (-5.48%). The S&P 500 logged its fourth weekly decline in 5 weeks and is now down nearly 10% since its recent peak a month ago. The risk-off mode was caused by the stronger CPI release last Tuesday, causing the S&P 500 to see its worst session since June 2020. The “soft landing hopes” from the week before is being eroded particularly after the World Bank warned of aggressive tightening possibly leading to a global recession, US Q3 GDP estimates coming down and the US 30-year mortgage rates topping 6% for the first time since 2008. The US Federal Reserve is expected to raise rates this week by 75 basis points but the possibility of seeing a 1% hike had jumped to 22%. Peak rate has jumped to 4-5% (1% higher than after the June FOMC meeting) and expectations of no rate cuts have jumped out to 2024 (70% of economists). The US 10 year treasury yield continues to make new 3-month highs (3.45%) due to inflation concerns and the USD dollar index remained at 20-year highs benefiting from safe-haven status. Gold dropped through long-term support and oil prices saw their third consecutive weekly decline on concerns around economic growth, helping to ease pressure on inflation. US Inflation expectations for 1-10 year timeframes fell and a major US rail strike was averted, both helping to take some pressure of equity markets.

Portfolio Movements

Johnson & Johnson (JNJ) has authorized a buyback of up to $5 billion in the company’s shares. At a US$424b market cap, J&J is the world’s largest and most diversified health care company. The company also reaffirmed full-year 2022 guidance for sales growth 6.5% – 7.5% and earnings per share of $10.65 to $10.75. “The last few years have demonstrated the resilience of Johnson & Johnson. With continued confidence in our business and pipeline, we believe that company shares are an attractive investment opportunity,” said CEO Joaquin Duato. “With our strong cash flow and lowest level of net debt in five years, we have the ability to invest in innovation, grow our dividend, execute strategic acquisitions, and take this action to deliver shareholder returns and drive long-term growth.”

Bank of America (BAC) have announced they have created a new 3,500 person strong team within their global wealth and investment management division to focus on lending to wealthy clients.
The new team will work alongside financial advisers and private bankers and will underwrite wealthy clients’ margin loans, securities lending, mortgages and vehicle loans.
The move looks to capitalise on the investment management division’s recent growth in this area. In their recent Q2 results deposits from the investment management division rose 5% to US$348b and loans rose 12% to US$222b from the year ago period.

Apple (APPL) Strong pre-order data is showing the new iPhone 14 Pro Max was the bestselling model in the new range, surpassing pre-orders of what the older version did in a similar timeframe post launch. Analysts said that the data points to strong demand for the latest mobile phone series, which was unveiled last week. At its biggest product launch of the year, Apple introduced the iPhone 14, fresh AirPods Pro earbuds and new Apple Watch models. The iPhone retains the general look of the older version while getting camera enhancements and a new satellite-messaging feature. The bulk of the iPhone upgrades are coming to the higher-end Pro line, which is also where pre orders are highest.

The Week Ahead