The S & P 500 and the NASDAQ 100 hit all time highs in early October and since then they have fallen about 10% each. The S & P 500 has turned negative for the year and the NASDAQ 100 has barely moved. FAANG (Facebook, Amazon, Apple, Netflix and Google/Alphabet) stocks accounted for almost all the 2018 gains until October. And their fall has caused the market meltdown but there is more to the story …
Restricted Stock Units (RSU) are company stock (or shares by another name) granted to employees as a form of compensation. Employers save some tax, and it generally aligns the long-term interest of employees (and shareholders) as it normally carries a vesting period. 2017 was great for technology company share prices and technology companies granted an eye-watering amount of Restricted Stock Units by value leaving banks way behind …
The S & P 500 has had a stellar run of nine and a half years of gains closing at a new high in the week gone by. It is up 300% since the 9th of March 2009 when it hit a multi-year low in the aftermath of the financial crisis. Even considering the time post the end of the last U.S. recession, the S & P 500 has outperformed every major financial metric by a big margin.
Everyone seems to be focussing on the equity markets recently, but equity markets haven’t really moved much over the past one month. Over the past month, major equity markets have lost between 1.5% to 4%.
The real action is in bonds and commodities. And trade seems to be flourishing too.
10-year government bond yields of major economies are lower by 5% to 40% (in relative terms not absolute terms) in just the past month. 10-year German bonds are down 12 bps over the past month. That wouldn’t sound much but they are down 28% from 42 bps to 30 bps. U.K. yields are down 8%, U.S. yields down 5%, Japanese yields down 40%. Even Greek yields are down 20% over just the past month. Does the market anticipate a pause in interest rate rises? It would appear so.
US employers added only 103,000 jobs in March as against 185,000 new jobs expected by economists surveyed by Bloomberg. Jobs have been added for 90 straight months, the longest phase on record. January’s job addition number was revised sharply downward from 239,000 to 176,000. Wage growth was 2.7% which was largely down to tax cuts driven wage rises earlier during the year rather than real wage inflation.
Any addition under 80,000 new jobs a month would cause the unemployment rate to rise. As we covered earlier, unemployment has always hit record multi year lows on an average 6 to 12 months before the start of a recession.
As reported earlier, Spotify listed directly on the NYSE today at an opening price of $165.90, the stock ended the first day of trading in New York at $149.01, up from the reference price of $132 set yesterday by the NYSE.
The 10 largest asset managers in the world, a list that includes BlackRock, Vanguard, State Street, Fidelity, Allianz, UBS and JP Morgan Asset Management have some $32 trillion assets under management (at the end of 2017). The entire space of asset managers have around $65 trillion of assets under management.