A 6.5% rate of GDP growth would usually merit “celebrations in the streets”, says Neil Irwin in The New York Times. Yet America’s second-quarter 6.5% annualised growth disappointed: it was lower than predicted and showed that the recovery is running into “obstacles”.
Shortages of building materials meant that the housing sector “actually contracted” slightly despite huge demand. Getting back to normal is proving a “grind”; consumption of services is still 7.4% below where you would have predicted it to be pre-pandemic, while “spending on durable goods”, which boomed during lockdowns, is 34% higher. Rising cases of the Delta variant in America could also sap the recovery. Investors are recalibrating.
As Nicholas Colas of DataTrek Research tells CNBC, all the “Big Tech companies” have reported unexpectedly good second-quarter earnings. Yet traders reacted by selling off most of them. Investors are worried that its pandemic sales boom will run out of steam. The concern is that we have reached peak earnings growth. “We’ve seen so much demand for tech... over the last year. Can it keep going?”. Corporate margins will be key, says Gina Martin Adams on Bloomberg. “Defined as earnings before interest and taxes divided by sales,” US operating margins are set to rise to a very healthy 16.7% over the next year. Yet spikes in inflation mean some are nervous.
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Analysts have “cut their margin estimates for a quarter of S&P 500 members in the last three months”. Margin trends have historically been a “strong leading indicator of stock-price direction”. For now the margin pressure is concentrated in a few sectors, such as “healthcare, utilities and consumer staples”. If it spreads that could presage a stockmarket rout.
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How to invest in frontier marketsFrontier markets can be extremely risky, but they offer access to exotic stocks in rapidly developing countries
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Should you put your trust in investment trusts?British investors have steered clear of investment trusts in recent years. They are missing a trick, says Max King
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How to invest in frontier markets
Frontier markets can be extremely risky, but they offer access to exotic stocks in rapidly developing countries
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Should you put your trust in investment trusts?
British investors have steered clear of investment trusts in recent years. They are missing a trick, says Max King
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Renewable energy investing: who is paying for the green revolution?Investors in renewables have not been rewarded, says Bruce Packard. Will they fund the government’s plans?
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The best ways to invest in Vietnam – Asia’s communist dynamoVietnam has long been one of our favourite markets. The prognosis remains auspicious, says Alex Rankine.
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India is a new global powerhouse — should you invest?India’s growth rate has slowed recently, but there is still ample scope for investors to benefit from its development.
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Why Chinese stocks are so far out of favourThere’s little appetite for Chinese stocks despite low valuations.
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Three companies that dominate their markets with critical productsA professional investor tells us where he’d put his money. This week: Charlie Huggins, manager of Wealth Club’s Quality Shares Portfolio, picks three stocks.
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Should you continue to hold Smithson Investment Trust?Opinion Smithson Investment Trust, a small- and mid-cap fund, has struggled to live up to lofty expectations, says Rupert Hargreaves.
