What a week! We’ve had the UK’s Autumn Statement, UK CPI data, earnings and more tech company layoffs.
As always, let’s jump right in.
Key Events
UK CPI (Inflation) Data for October 2022
On Wednesday, we received the inflation data for October. On a year-over-year basis, inflation came in at 11.1%; a new 40-year high. This is largely due to the increase in energy and food costs.
The expectation for UK inflation for October was 10.7%, making this a huge miss, and will likely force the Bank of England to continue aggressively hiking interest rates at their next meeting.
Without getting too political, it’s definitely plausible that this is illustrates the government’s failed policies over the previous months and years. Particularly when it comes to building new energy-generating infrastructure – from nuclear power stations to on-shore and off-shore wind, solar, etc – and reducing the UK’s reliance on imported natural gas. It also shows the archaic method in which electricity and gas prices are calculated (where even 100% renewable energy is charged at the rate of wholesale gas).
UK Autumn Statement 2022
Another controversial budget from the UK government, and on a whole different planet compared to the ‘mini-budget’ issued by the previous Prime Minister, Liz Truss. On the surface, this budget offers much-needed support for low-income families and those on benefits (though, not until April 2023). But upon closer inspection, it seems to be somewhat of a smoke-and-mirrors act, with sweeping stealth taxes for the lower and middle class over the coming years.
I won’t go into the policy details here. Instead, click here for a detailed account of what was (and wasn’t) announced in the Autumn Statement.
In terms of how this affects the stock and bond market, however, there are a few things to note. Firstly, the OBR claims we are already in a recession and will be throughout 2023. Current forecasts suggest GDP will fall by 1.4% in 2023, before rising again in 2024 by 1.3%, then 2.6% in 2025.
As well as the recession, the OBR also suggest that average inflation for 2023 will be 9.1%, with average inflation in 2023 still high, at 7.4%.
There’s no way of knowing for certain (and I’m not a financial advisor; just a reminder), but it’s plausible that these two factors alone will put huge pressure on FTSE companies, with revenue and margin compression across the board (particularly when taking a higher minimum wage into account, along with higher interest rates). If companies continue to raise prices as a result? Then we’ll begin to see a wage-price-spiral, which is much, much worse!
Personally, I don’t expect the FTSE100 to move much in the next two years or so based on the above. I’d love to hear others’ thoughts on this!
Stock Market News
The Cryptocurrency Meltdown Continues
Following last week’s FTX fallout, where the company reported it was filing for bankruptcy and the CEO resigned, there have been numerous reports coming out suggesting both personal and company-wide neglect and misconduct.
On Wednesday, we got news that BlockFi is expected to file for bankruptcy in the coming days.
If that wasn’t bad news enough, the sister company to Gemini (another exchange), Genesis, is also reportedly in trouble. While said reports claim that Gemini itself is at minimal risk, this shouldn’t be taken as gospel and may not in fact be true.
The main culprit for these collapses? Simply that users are fleeing the exchanges at such a rate, that the exchanges do not have the cash available to honour further withdrawals. Essentially, they’re having a liquidity crisis right now.
Reportedly, exchanges such as Coinbase, who allow users to have their own crypto wallet (it’s important to remember – not your key? Not your crypto!) are seeing less volatility. However, it’s feared that many casual crypto investors won’t realise that having their own wallet is possible within the exchange itself, leading to continued outflows.
It’ll be interesting to see how this unfolds over the coming weeks.
Amazon (AMZN) – Up to 10,000 Staff to be Cut
On Monday, the New York Times reported that Amazon plans to cut around 10,000 staff in the largest ever headcount reduction in its history.
It’s worth noting, though, that this is a tiny percentage of Amazon’s overall headcount. As of September 2022, the company had over 1.5 million employees.
These job cuts are reportedly to start immediately; with the ‘device’ divisions being the biggest casualty (Echo/Alexa staff), as well as a reduction for retail divisions and human resources.
Company Earnings Reports for W/E 20th November 2022
On Tuesday, I covered the earnings reports of the following 2 companies. Click here to find out what happened:
- Walmart (WMT) – Q3 (Fiscal Q3 2023) Earnings
- The Home Depot (HD) – Q3 Earnings
On Wednesday, I covered the earnings reports of the following 2 companies. Click here to find out what happened:
- Target (TGT) – Q3 Earnings
- Nvidia (NVDA) – Q3 Earnings
Next Week
Company Earnings Reports
The majority of earnings have now been released, meaning I’ll return to adding the results to these weekly updates instead.
Here’s a list of the companies I’ll be covering next week:
- Dell Technologies (DELL) – 21st November
- Zoom Video Communications (ZM) – 21st November
- United Utilities (UU) – 23rd November
Let me know your thoughts on this week’s events, in the comments!
