The Dow Jones Index ended slightly in the red last week, as it was down 0.16 percent. The S&P 500 and NASDAQ, on the other hand, ended the week up 1.73 percent and 3.69 percent respectively. This indicates, yet again, that technology stocks are driving the market and that retail traders are pushing these stocks up. In fact, mostly those under 35 who trade using the Robinhood platform are driving retail trading. This push continues to look more and more like a bubble, as seen with the tech boom in the early 2000’s and the Bitcoin bubble. As we know, all bubbles burst and when they do, the streets become littered with the blood of retail traders.
Last week’s earnings season reports were similar to the prior week with 60 to 70 percent either meeting or exceeding expectations. Of note, UPS was up 20.63 percent for the week after announcing double-digit growth in the second quarter. Chip manufacturer, Qualcom, ended the week up 18.81 percent after it settled a licensing dispute with Huawei. Huawei is the world’s largest smart phone producer, and the deal now makes way for the 5G roll out.
Amazon recorded record growth, as its profits doubled while Apple reported an 11 percent increase in quarterly sales. Apple also announced a four for one stock split, which will occur on 24th August. This is Apple’s fifth stock split since it listed. Facebook sales also rose 11 percent in the quarter, while Google reported a decline in quarterly revenue and profits were down. Other reports worth looking at include Disney, Virgin Galatic, Uber and Bristol-Myers Squib.
Tesla made news headlines after announcing its fourth straight quarter of profit. Given that Tesla has now been profitable for a year, it looks promising that it will be included into the S&P 500 index. Inclusion in the index will see a massive rebalancing of portfolios by fund managers, which is likely to cause excessive selling of other stocks in the index. If Telsa is added to the S&P 500, it will be in the top 20 largest companies with a market value of around $277 billion.
One reason for Tesla’s strong advance over the past few months could be that fund managers have already started buying the stock in preparation for its inclusion in the Index. Given this, we may not see a big move up if Telsa is included in the S&P 500. Regardless of whether Tesla rises or falls, we are likely to see billions of dollars shed in other companies to make way for this stock in portfolios.
The announcement that Kandi Technologies will launch two electric vehicles in the US this month will affect Tesla. Kandi is China’s version of Tesla and will be a big competitor, as their new models are being released much cheaper in comparison to Tesla. The K27 model looks to retail under $13,000, while the lowest Tesla price is at least three times that.
On the economic front, US GDP dropped 32.9 percent, which is the worst drop since World War II. The deepest contraction in US GDP during the GFC was the fourth quarter of 2008, when the rate of contraction was minus 8.4 percent. That said, the news is not all bad given that it is expected that GPD will improve sharply later in the year once things settle down in relation to COVID-19 and the current restrictions.
Unemployment dropped to 11.1 percent in June down from almost 15 percent in April, which is a good sign. Over the past 10 years, unemployment declined from around 10 percent to its lowest levels ever. While current unemployment is comparable to ten years ago, it is more than four times what it was at its lowest level of 2.5 percent in February, which is better than expected.
For now good luck and good trading.
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First view and like ! mine
Hi saurin shah we are glad to hear that you enjoyed the video!
Jim Beach used to manage Queen.
Absolutely correct, just not the Jim Beach we speak to.
Great show. I’m from Sydney, bought your book and DVD. Hopefully things will get better soon in VIC. NSW has some worrying signs too. Stay vigilant and be safe.
Awesome, thank you!
Hi Dale. Wanting to know about guaranteed stop loss, if they exist anymore, and are they worth having. I know they existed for CFD’s a while ago. Glad I’m not in Melbourne with the situation there. I am in Indonesia.
Yes I’m in Melbourne it sucks but what do you do
Yes they are still available for a fee, you would just need to check with individual brokers to determine who is best for you to trade with.
Hi Dale, I know you’ve said you’re not a fan of ETFs but would it make sense for someone young like me who doesn’t have lots of money to invest to choose an ETF that will allow me to invest in a broad range of companies with low brokerage fees or should I just choose one or two that I am quite confident on? I guess being young means I can take more risk but I am worried that if I only invest in one or two companies and they or their sector underperformed I will miss out on potential gains. Is this a risk worth taking in your opinion (perhaps in the future when the market has settled a bit).
Great question Max we will endevour to answer your question in next weeks report!
Hi Dale I’m from Melbourne I bought workhorse this week at 17 dollars and would love to get your opinion on the stock.