Take From the Rich, Give to the Poor - Holdun

Market Summary

Another week, Another record high. After last week’s modest decline, the major U.S. indexes responded in a typically bullish fashion to close out the week at record levels. The S&P 500 and Nasdaq rose 2% and 2.8%, respectively.

88% of the S&P 500 companies that have reported Q2 earnings have exceeded analysts’ estimates, the highest rate since FactSet began tracking that data in 2008.

Treasury yields continued to slip this week as government bond prices rallied to a five-month high. Yields closed out the week at 1.28%, significantly below the recent March highs of 1.74%.

Equities

2.0%S&P 500

Growth stocks remained in favour this week as market participants continue to reverse much of the value outperformance we saw earlier in the year. The most recent rotation leaves the two equity styles with roughly equal performance year to date.

Bitcoin Bounce

36.5%YTD

The major crypto names experience a late-night surge on Sunday, with bitcoin now sitting at a six-week high just below $40,000.

Bullish comments earlier in the week from the tech trio of Elon Musk, Jack Dorsey, and Cathie Wood spurred the recent positive sentiment.

The outlook has been boosted further by the news that Amazon may accept cryptocurrency payments—by the end of the year. While early reports are vague and yet to be confirmed by Amazon, inclusion across the amazon infrastructure would be a significant steppingstone in the cryptocurrency space.

Stock Watch

Snap Inc.

27.0%5 DAY PERFORMANCE

Snap Inc. jumped a colossal 24% on Thursday after reporting its biggest growth quarter in four years.

Snaps next big growth opportunity appears to be in the AR space. The company has invested heavily in augmented reality and is looking to change the e-commerce experience by allowing those shopping online to “try on” clothing using its AR technology.

While revenue more than doubled to $982 million in Q2 2021 and the AR tech offers significant growth opportunities, valuations appear stretched, to say the least.

For me, Snap Inc. will need to show an ability to turn its lower-income younger users into paying customers and turn big revenue gains into realised profits before the current market cap is justified.

Market Outlook

Stocks fell in early trading today. Positive earnings reports were not enough to maintain all-time high numbers as rising COVID-19 cases, inflation and economic growth all weighed on investor sentiment.

This week will be the most important of the entire earnings season as all of Big Tech, which makes up over one-fifth of the S&P 500 index, will give investors a peek into their books.

Robinhood

De facto Guardian of the retail investor in the fight against the wall street elite, Robinhood has fast become the poster child of discount brokers and the retail investor revolution.

As such, its IPO later this week will undoubtedly generate a lot of interest.

With almost 18 million active users, an $80B AUM and revenue close to $1 billion last year’s. Robinhood makes for a compelling investment opportunity, but with a predicted valuation of $35 billion, much of the juice may have already been squeeze by the private market before it becomes available to the public.

In short, I’m skeptical in the long run, especially with the majority of earnings coming from the sale of order flows. Still, this IPO will undoubtedly generate a lot of interest over the near term.

HOLDUN