The September slump had a number of commentators concerned about falling markets, however, they have recently been moving up, largely due to an excellent quarterly earnings season in the USA; a few highlights below:

  • FORD ($0.51 v. $0.27cps expected)
  • McDonalds ($2.76 v. $2.46 expected)
  • Alphabet ($27.99 v. $23.48 expected)
  • AMD ($0.73 versus $0.67 expected)
  • Microsoft ($2.27 vs. $2.07 expected)

Others include GE, Restaurant Brands (parent of Burger King), Facebook, Twitter and the large banks.
The USA is in post-pandemic mode, so this may provide a short-term idea on what we can expect in Australia.
Much of the recent commentary had been about possible inflation risk. There is no doubt inflation is prevalent, the question, however, is whether it is transitory as a result of post-pandemic spending and labour and supply shortages, or is it more permanent.
Even if it were to be more permanent, we must remember this has been a unique time in history. Markets have operated perfectly normally with reasonable inflation and mid-single-digit interest rates. Nobody can foretell what rates and inflation will do, and even if the forecast is correct, it can be very unwise altering portfolio positions simply because of macro-economic forecasts.
Howard Marks says “…do not predicate investments on macro forecasts”.
For over 18 years we have been encouraging our readers to invest with a ‘business-owner’ mindset,carefully considering any decision to buy and sell equities. This has held our investors in good stead during good times, and particularly in the tougher times such as the GFC and the short-sharp Covid drop. We believe this approach will hold true for many decades to come.

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