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- 👉 The Investing Week Ahead: 05/30/23
👉 The Investing Week Ahead: 05/30/23
"AI should be a global priority alongside pandemics and nuclear war..."
Happy Tuesday.
We hope you had a restful Memorial Day Weekend. Let’s start this short week’s outlook off with two important callouts:
The U.S. Treasury Market
The potential end of Quantitative Tightening (QT) is being taken rather seriously due to risks posed by the debt ceiling. The aftermath of reaching an official agreement on the debt ceiling (more below) will likely lead to an even-lower cash balance for the U.S. Treasury — necessitating quick debt issuance to sustain government functions.
The lack of demand for U.S. Treasuries (specifically abroad) and the potential tightening effect of insurance bonds & QT create a quagmire of a situation.
Takeaway — We’ll see how long they can keep QT up given the Treasury’s low (and likely soon-to-be lower) cash balance.
The Case for International Stocks
For the last 15 years — U.S.-based stocks have dominated. Whether it’s large caps or small caps — your portfolio has been plenty fine in American stocks over that time period. U.S. outperformance has caused a wider-than-usual gap in valuations. International stocks currently have a lower than normal P/E ratio than U.S. stocks and a higher than normal relative dividend yield.
From 2000-2008 — international stocks were the place to be. International value also currently looks much cheaper than international growth. It’s especially interesting when you see a country like Brazil being called “The Switzerland of South America.”
Takeaway — There’s a case to be made that the next “cycle” could be foreign-based investments outperforming those in the U.S — something for us to research and all of us to watch.
Let’s dive into the Investing Week Ahead!
Key Earnings Announcements:
Okta & Salesforce are in focus.
Tuesday (5/30): Ambarella, Box, Canopy Growth, Hewlett Packard Enterprise, HP, Sportsman’s Warehouse, U-Haul
Wednesday (5/31): Advance Auto Parts, C3.ai, Capri Holdings, Chewy, Conn's, CrowdStrike, Donaldson, Frontline, GameStop, NetApp, Nordstrom, Okta, Pure Storage, Salesforce, Trip.com Group, Victoria's Secret
Thursday (6/1): Caleres, Calavo Growers, ChargePoint, Cooper, Dell Technologies, Designer Brands, Dollar General, Five Below, Hormel Foods, Macy's, MongoDB, SentinelOne, VMware, Zscaler, Zumiez
Friday (6/2): N/A
What We’re Watching:
Salesforce’s last earnings report pointed toward growing contributions from MuleSoft and Tableau, in addition to incremental investments in international markets to drive growth. Operating Cash Flow ended the year as a highlight, so we’re interested to see if CRM kept pace in Q1.
Okta’s last earnings report focused on The Okta Identity Cloud — including Okta Trust (cloud security certifications), vendor neutrality (increasing TAM), and 7,000+ Okta network integrations. Total Revenue jumped +33% YoY and Free Cash Flow Margin increased +12.8% YoY.
Investor Events / Global Affairs:
The Debt Ceiling debacle approaches a controversial solution, Walmart is expected to receive some questions about Target’s cultural blow-up, & the CEO of OpenAI co-authored a letter sharing the risks of artificial intelligence.
Debt Ceiling Agreement Faces Approval
Over the weekend, President Biden and House Speaker McCarthy noted that they came to a soft agreement on the debt limit extension. This week, it faces scrutiny throughout Congress — especially from Republican critics of McCarthy that disagree with adding $4 trillion to the country’s debt balance. Here’s a solid breakdown from ABC — and our main takeaways are below:
Walmart (WMT) Shareholders’ Week
Walmart Shareholders' Week consists of two main parts — the Shareholders' Meeting and the Associates' Celebration. Walmart workers in town for the celebration typically have many events scheduled throughout the week, and it’s essentially a big festival down in Arkansas.
Here is a link to the public release from Walmart about the event.
Really the only comparable event would be that of Warren Buffett and Berkshire Hathaway — which we presented the takeaways from here.
Why Do We Care?
The answer here is pretty simple — we are begging for a comment on Target getting destroyed in the market. In case you haven’t heard, Target has been facing widespread boycotts over LGBTQ placements in stores that are viewed as being overly aggressive / inappropriate for young children.
We’re not here to provide an opinion on that, but we’d sure like to pop some popcorn and listen to a Q&A session from Walmart leadership when they are asked.
AI Risk Given Seriousness Level of Pandemics & Wars
Execs from Alphabet, Amazon, Apple, Microsoft, OpenAI, and dozens of other companies all signed a very succinct letter from the Center for AI Safety.
In March, tech leaders like Elon Musk and Steve Wozniak also sponsored a letter that called for a six-month pause in the development of many AI tools to develop new safety standards for the technology.
The message from the Center for AI Safety is rather simple:
“AI experts, journalists, policymakers, and the public are increasingly discussing a broad spectrum of important and urgent risks from AI. Even so, it can be difficult to voice concerns about some of advanced AI’s most severe risks. The succinct statement below aims to overcome this obstacle and open up discussion. It is also meant to create common knowledge of the growing number of experts and public figures who also take some of advanced AI’s most severe risks seriously.
Mitigating the risk of extinction from AI should be a global priority alongside other societal-scale risks such as pandemics and nuclear war.”
Major Economic Events:
The newest Jobs Report & a Manufacturing industry heat check.
Tuesday (5/30): Consumer Confidence, S&P Case-Shiller Home Price Index (20 Cities), Speech by Richmond Fed President Barkin
Wednesday (5/31): ADP Employment, Chicago Business Barometer, Fed Beige Book, Job Openings, Speech by Philadelphia Fed President Harker
Thursday (6/1): Construction Spending, ISM Manufacturing, S&P Manufacturing PMI, Speech by Philadelphia Fed President Harker, U.S. Q1 Productivity
Friday (6/2): Jobs Report (Including Unemployment Rate)
What We’re Watching:
The last jobs report saw nonfarm payrolls, the unemployment rate, and average hourly earnings all beat estimates in a positive way. As mentioned in yesterday’s Week in Review — there are a few key reports that will impact how Jerome Powell and the Fed act during the June Fed meeting. This jobs report being another strong one would increase the chances of a 25 basis point rate hike.
We are looking to gain a lot of knowledge on the manufacturing industry from this week’s ISM Manufacturing, S&P Manufacturing PMI, and U.S. Q1 Productivity readings.
Events-Driven Winners:
Which stocks moved the most last week.
Our friends at LevelFields scrub through thousands of data points each week to determine how events impact stock prices.
If you’re looking for a great source of stock-moving news — the LevelFields Stock News & Analyses page is a great site.
If you’re starting your investing journey or are interested in buying T-bills yielding 5% or more, consider visiting Public.com.
Disclaimer: This is not financial advice or recommendation for any investment. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.
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