Below we share charts and quotes we found interesting from recent public market data and company commentary.
In this edition, we review:
- Currencies: Is it a good time to travel abroad?
- How has equity market performance varied by geography?
- What are CEOs saying about technology innovation?
- How do market valuations stack up versus other asset classes?
- Is the US consumer shifting more rapidly?
Have a wonderful Memorial Day Weekend!
The Bycoff Group
A Good Time to Plan a European Vacation?
- The Euro has declined over 12% versus the Dollar with the Euro at just $1.07 down from over a $1.22 last year.
- A similar trend can be seen versus the Yen for those looking to explore Japan as well.
- From a market standpoint, this decline pressures the revenues and earnings of US-based companies that sell abroad, including Coca Cola and Google.
- It also has the affect of lowering asset values of foreign companies that trade here in the US.
How are the major geographic indices performing?
- After a weaker start to the year than the S&P 500, Europe and Developed Asia (EFA) and the Emerging Markets have gone on to outperform US Indices.
- International market performance is being led by the United Kingdom, Saudi Arabia, and Latin America, including Brazil, which are all up on the year.
- US Small Caps are still lagging but are showing signs of closing the gap.
- Note all markets are now down over the last year as well with the S&P 500 retracing levels back to April 2021 (or beginning of 2021 at times) and the Nasdaq retracing all the way back to October 2020.
Innovation Continues - Recent Quotes from Company Management Teams
"This month, Waymo became the first company to run fully autonomous ride hailing operations in multiple locations simultaneously. Today employees can take rider only trips in San Francisco joining the growing number of public Waymo on riders in Phoenix. Wing launched its on-demand drone deliveries in the Dallas-Fort Worth area. In the first quarter of 2022, Wing completed over 50,000 commercial deliveries. That's up more than 3x year-over-year." - Sundar Pichai, CEO of Google, April 26, 2022
"The megatrends that I talk about, EVs are going to happen, whether they are -- they get to 50% of total demand in '28 or '26 or '27 is irrelevant it's still fundamentally growing as a percent of total SAAR, that's the content that's driving our growth and that's the exposure we have, where customers are highly confident of their outlook and willing to sign up for it." - Hassane El-Khoury, CEO of OnSemi, May 2, 2022
How do market valuations stack up across asset classes?
- US and international public equity market valuations are more attractive now than last year.
- The below chart measures earnings or cash flow yields for the major asset classes below.
- US market yields are now close to 6% led by small cap yields at 6%. Meanwhile, international yields are close to 10%.
- Higher yields are generally better for investors and while these cash flow streams are subject to risk from recession, we have noticed high quality companies such as large US retailers (see Dicks Sporting Goods) rebounding sharply off high single digit cash flow yields.
Are US Consumer trends changing faster now?
- We believe so and expect us to do more research here.
- Read the Chief Growth Officer of Target, Christina Hennington's thoughts on the matter from their May earnings conference call:
"We've been through series of chapters of consumer behavior ship, almost every two months for two plus years honestly. And what we're seeing is that the consumer has taken control of their environment more so, because the macro environment feels out of control. And so despite the fact that they might have worries about inflation, they're in charge and they're making decisions based on their preferences and what they value which means going back out if that's what they want to do traveling, because they've missed it seeing their friends and family again and it's about moderating those behavior ships and accommodating our assortment and our messaging and our relevance based on how those shifts happen. And so it's really important to stay close to the consumer and not expect that past behavior is an indicator of the future." - Christina Hennington, Chief Growth Officer of Target Corp., May 18, 2022
Source: All market data per Bloomberg; Earnings and Cash Flow Yields for public markets represents NTM earnings estimates for the index over current and historical index prices.