Blogs/All/ Rearview Mirror (September 10, 2022)

Rearview Mirror (September 10, 2022)

3rd September – 9th September 2022 | Another week in the markets

S&P 500NasdaqVIXDJIARussell 1000NYSE
4,067.3612,112.3122.7932,151.712,240.4815,190.79
3.65%4.14%-10.52%2.66%3.86%3.41%
Nifty 50GoldSilverBrent crudeUSD-INREUR-INR
17,833.35$1,727.60$18.79$92.4279.6780.03
1.68%1.11%6.40%0.27%-0.06%0.83%

Source: MarketWatch

Hello Saturday,

This week the world mourns Queen Elizabeth’s death, the bond market declines to enter the bear market, and Apple hosts its annual iPhone event. 

  • Ernst & Young plans to split into two companies to separate its core businesses 
  • Queen Elizabeth dies aged 96 as the longest-reigning British monarch 
  • Apple launches its new iPhone model without a price increase 
  • European Central Bank and Bank of Canada each hike interest rates by 75 basis points
  • The global bond market declines and enters its first bear market in a generation

Taking stock | M(E&Y)osis | Reign check | iDontknowwhattomakeofthis | Hitchhiker’s guide to inflation targeting | First-gen bear | Invest wisely

Taking stock

Stocks rallied on Friday, and Wall Street saw all major indices record their first weekly gains in four weeks. S&P gained 3.65%, the Dow climbed 2.66%, and Nasdaq jumped 4.14% this week. These gains come as the market recovers from the sharp sell-off in mid-August triggered by investor concerns over tighter monetary policy. 

M(E&Y)osis

Ernst & Young (EY), one of the Big Four accounting firms, said on Thursday that it is planning to split its two primary business practices – auditing and consulting – into separate companies. This is mostly to ease regulatory concerns and avoid potential conflicts of interest between the auditing and the advisory work that the company does for its corporate clients. All of the Big Four accounting firms – EY, KPMG, PricewaterhouseCoopers, and Deloitte – have been under regulatory pressure to restructure their business over the last few years. Despite this, PricewaterhouseCoopers and Deloitte stated earlier this year that they have no plans to split their business units. 

For EY to go forward with this split, it needs to be approved by over 10,000 EY partners who work across 140 countries. The proposed split would also translate to huge payouts for some of the company’s partners. Also, once the consulting and advisory business is separated from the accounting operations, it will be better positioned to be more profitable. This is because the range of services it can provide will no longer be constrained by conflict of interest regulations. 

Reign check

On Thursday, Queen Elizabeth, Britain’s longest-reigning monarch, died peacefully at her home in Scotland at the age of 96. Since her coronation in 1952, Queen Elizabeth had maintained the popularity of the monarchy over her 70 years on the throne across several social, economic, and political changes. 

From a purely economic standpoint, the UK has grown to be richer and healthier over the last 70 years, and those born in 1952 have had higher-than-average income throughout their lives, according to the Institute for Fiscal Studies. The British economy has grown five times bigger since 1952. However, productivity has slowed down recently.

Growth of the British Economy since 1952:

iDontknowwhattomakeofthis

At Apple’s Far Out event on Wednesday, CEO Tim Cook announced the iPhone 14 Pro and iPhone 14 Pro Max. Surprisingly, there is no price increase as many analysts had anticipated – the new models are available at the same price as last year’s. The new iPhones come with satellite messaging for emergencies, crash detection, and an improved camera. The company also announced the new AirPods Pro and the Apple Watch Series 8. The market’s reception of Apple’s new iPhone launch was lukewarm, and the stock was barely up by 0.4% as Wednesday’s event concluded.  

Hitchhiker’s guide to inflation targeting

Eurozone’s inflation is at a half-century high. It’s heading towards a recession, and gas rationing may be on the cards. In an attempt to stop inflation from entering the double-digit territory, the European Central Bank (ECB) raised its key interest rates by 75 basis points on Thursday, with a promise of further rate hikes, given the bleak forecasts. The Bank of Canada also increased its benchmark interest rate by 75 basis points on Wednesday to 3.25%. This marks the fifth rate hike by Canada’s central bank in 2022 so far, up from just 0.25%, in January this year. 

The Federal Reserve is also expected to raise its rate by either 50 or 75 basis points in its September policy meeting later this month. Economists expect the Reserve Bank of India (RBI) to follow suit and increase the repo rate by at least 35 basis points in the September monetary policy review. In three major hikes since May 2022, RBI has raised the repo rate by a cumulative 140 basis points to 5.40%. 

First-gen bear 

The global bond market is close to its first bear market in a generation. Soaring inflation and tighter monetary policy by central banks across the globe have brought its four-decade bull market to an end. The Bloomberg Global Aggregate Total Return Index of government and investment-grade corporate bonds is down by more than 20% from its peak in 2021. This is the index’s biggest decline since its inception in 1990. 

Invest wisely 

Given the state of the global markets since the year began, you should focus on diversifying your investment portfolio. Look to invest across geographies, as markets of different countries don’t move in tandem. Also, get instant diversification with investment products such as Exchange-Traded Funds (ETFs). You can undertake both types of diversification by downloading the Appreciate App and gaining easy access to a range of global stocks and ETFs.

Warm regards,
Another week
in the markets

Team Appreciate

Team Appreciate