Finimize's October Investment Briefing

Finimize's October Investment Briefing

over 4 years ago3 mins

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This week, we held our first Investment Briefing for Premium subscribers in London. Here’s what Carl (VP Content and former Goldman Sachs analyst) and Andrew (Entrepreneur in Residence and former Bloomberg managing editor) think you need to know for the weeks ahead…

Third-Quarter Earnings Season

It’s earnings season: the two or three weeks when thousands of companies report on how they’ve been performing. Carl explained how for the last three quarters, analysts have expected earnings to shrink – though companies tend to do better than analysts predict.

Grey lines show expectations, blue lines show the reality
Grey lines show expectations, blue lines show the reality

Wondering why? It’s all because companies tend to tell analysts what to expect, and when they do, they underpromise and overdeliver. But because investors know that’s going to happen, stock prices don’t actually move that much (more on this in our News and Markets Pack).

WeWork’s Effect On Tech Stocks

Is WeWork really a tech stock? That categorization might come in handy if it ever IPOs: its share price could benefit from being included in technology exchange-traded funds. But that seems a long way off after its botched IPO, which might in turn affect other stocks in the future. Carl highlighted the importance of WeWork on investor sentiment: if investors think it’s less likely other investors will pay more for a certain stock, they might not be willing to buy it.

One Finimizer suggested that if WeWork had IPO’d before Uber and Lyft, it might have been successful. Andrew wasn’t so sure: Lyft IPO’d before Uber, but its stock has fallen by more than its rival’s.

"At the end of the day, people will pay what they want to pay for a certain stock." – Andrew, Entrepreneur in Residence

Brexit: What Will A Deal Do?

Lots of investors are betting on further declines in the pound, shown by the grey bars in the below chart. If positive news appears, you might expect to see the pound’s value increase quite rapidly, exacerbated by traders’ unwinding of these “short” positions. One Finimizer asked if that meant now was a good time to buy the pound. But as Andrew pointed out, that’d be a bet on everything being okay in Parliament, which is no sure thing…

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Importantly, the FTSE 100 is “pretty irrelevant” as a barometer of the UK economy. A large number of the stocks have little to do with Britain, because they do most of their business overseas. Instead, a Brexit deal would help the companies that earn revenue from selling to UK businesses and consumers – and the FTSE 250 is a better proxy for that.

Why Are Bond Yields So Low?

Government bond yields have fallen over the past 40 years – even turning negative in some countries. As Andrew explained, this is because the world’s getting older, so more and more people are saving for retirement. That pushes money into safe assets like bonds, driving their prices up and yields down. You can read more on this in the Our Aging Planet Pack, or in this Weekly email.

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That means all investors – including you – will now need to take on more risk to get a healthy return on their money. Aptly, the briefing ended with all the attendees predicting which stock will gain the most in the next month. Come to November’s event to find out who’ll win – sign up now.

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Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

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