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Markets That Matter – 2022 February – Newsletter

​It’s been quite a start to the year for markets (aside from sleepy FX). The S&P 500 recorded its worst start to a year, ever. Inflation continues to run hot, US CPI just hit a 40-year record with a headline print of 7.5% y/y. Markets are now pricing in over 6 hikes from the Fed this year, with a potential for a 50bps hike in the March meeting. But is inflation close to peaking anyway? We take a look at some charts that suggest that could be the case. Geopolitical tensions have been rising and war could be imminent – what will the knock-on effect be for the world and for markets? To kick things off, let’s take a dive into what was an extremely volatile earnings season for the big tech – all is not well in the Meta (verse)?

Life in the Meta

Sounds like a fictional character from a new Avengers movie but in reality, FANGMAN represents the seven largest equities (by market cap) in the world (Facebook, Amazon, Netflix, Google, Microsoft, Amazon, Nvidia). Perhaps he/she/they need a new name as Facebook recently changed to Meta. However, this name change didn’t stop Mr Zuckerberg’s company from shedding over $232bn in market value (the largest ever $ loss in one day) after its massively disappointing earnings report. 

FB’s daily active users dropped for the first time in its 18 year history, while the graphic below demonstrates the huge drop off in usage by teenagers, who have been graduating towards such as YouTube and more recently TikTok. 

Mr Zuckerberg also highlighted that advertisers were cutting spending but can the ‘supply chain crisis’ and inflation really be blamed for this? It appears more blame can be put on the App Tracking Transparency policy introduced by Apple last year. The policy lets people choose whether or not they want to be tracked around the internet by companies, like Meta, who can then sell that information to advertisers. As well, the name change to Meta, named after a concept that doesn’t exist yet (the Metaverse) and won’t do for years, is an odd move for a company that makes money from advertising. Zuckerberg has committed to spending tens of billions of dollars on the project (running at a significant loss per year), even though evidence that people want to live their lives in a virtual world is pretty thin. 

Overall Meta has tumbled out of the world’s 10 largest companies by market value, hammered by its worst monthly stock decline ever.

No wonder shareholders are ‘unfriending’.

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