The Investing Week Ahead: 7/25/22
This most consequential 5-day period of the summer: 175 S&P 500 companies report earnings and we see if we're officially in a recession.
Welcome to the end of July.
We’re not sure how it came so quickly. While it’s not necessarily something that should be used for investing convictions, we love to occasionally look at macro trends that are historically tested (many decades of data). One of the simplest ones is the average percent change of the S&P 500 over the last 90+ years:
Does this mean that you should sell and come back in October? No, but the historical deceleration from July through September is absolutely worth noting. Of course if the barrage of earnings reports this week largely beat expectations, then the next few months may be smoother sailing. Bottom line – this is a colossal week for the market going forward. Read on for the things you all should be keeping an eye on.
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The Investing Week Ahead — Too Long, Didn’t Read:
⚡ 175 companies report, led by Alphabet, Amazon, Apple, Meta, & Microsoft.
⚡ We find out if the U.S. has had two-straight quarters of negative GDP growth.
⚡ Waiting for consumer confidence & overall sentiment to see some relief.
Key Earnings Announcements:
The average earnings beat of companies that have already reported is 3.6% — well below the 8.8% five-year average (FactSet).
Monday (7/25): Cadence Design Systems, Infosys, Logitech, NXP Semiconductors, Philips, Squarespace
Tuesday (7/26): Alphabet, Chipotle, Coca-Cola, GE, GM, McDonald’s, Microsoft, Raytheon Technologies, UPS, Visa
Wednesday (7/27): Boeing, Etsy, Ford, Hilton, Humana, Meta, Qualcomm, ServiceNow, Shopify, Spotify, Teladoc Health, Waste Management
Thursday (7/28): Altria, Amazon, Apple, Hertz, Intel, Mastercard, Merck, Pfizer, Roku, Southwest Airlines, Tilray, Valero
Friday (7/29): Abbvie, AstraZeneca, Chevron, Colgate-Palmolive, ExxonMobil
What We’re Watching:
Too Much Privacy? When people think about Apple’s (AAPL ) iOS14 changes to user data privacy, folks usually think about how it has negatively impacted Meta’s business model or how they’re ‘keeping up their fences’ against other Big Tech company. What gets lost in the equation is the fact that businesses of all shapes and sizes are being directly impacted by the lack of targeted advertising abilities. We’ll be looking for CEO Tim Cook to address the dicey topic this week in his earnings call.
Amazon Unaffected? At the beginning of last week, both Google (GOOG ) and Microsoft (MSFT ) began to pump the brakes on hiring. Within the same 24 hours, Apple also announced its plans to slow hiring and cut back on spending. We’re keeping a close eye on Amazon’s work force sentiment — giving us a good gauge on retail spending.
Meta Bullishness Rising: One thing we’ve noticed is the amount of ‘buys’ and ‘strong buys’ that have been placed on META . Some argue that an earnings beat is probably because shares have already fallen -50% over the last year and expectations are so pessimistic. Some analysts argue that Meta’s top line revenue has been too downwardly revised, reduced R&D investments compared to last year will please investors, and the company’s share repurchase program has & will continue to keep the business afloat during turbulent times. Given the horrible results of Snapchat last week (SNAP ), it’s tough to feel comfortable betting on any stock that’s largely focused on social media advertising. A reasonable case can be made that Facebook is undervalued, but we want more clarity before adding to any existing positions. Furthermore, Seeking Alpha’s incredible Quant Rating system has it listed as a 3.1/5 (HOLD). However, a company that can generate as much as $30 BILLION in revenue during any given quarter is not necessarily one to ‘sleep on’.
Guns, Weed, and Web Services.
Monday (7/25): Shareholder Vote for Obagi & Milk Makeup Going Public Via Waldencast Acq. Corp.
Tuesday (7/26): Amazon Web Services Re:Inforce Conference, Senate Cannabis Decriminalization Meeting, Spirit Airlines Vote (Again) on Frontier Group Buyout
Wednesday (7/27): House Committee Meets on Gun Manufacturer Practices & Profits, Shareholder Vote for Apexigen (Cancer Drugs) Going Public Via Brookline Capital Acq.
Thursday (7/28): Charles Schwab Summer Business Update, Ford Expands Upon Q2 Earnings During Fireside Chat w/ BNP Paribas
Friday (7/29): N/A
What We’re Watching:
Being the biggest week of the summer for earnings reports, investor events are taking a backseat. We’ll be paying closest attention to the AWS conference and seeing if JetBlue can steal the Spirit Airlines merger deal from Frontier Group. If either of them end up merging with Spirit — it would immediately become the fifth-largest airline in the United States. It turns out investing into Spirit Airlines (SAVE ) at the turn of the new year would have been an incredible inflation hedge.
Major Economic Updates:
We find out this week if we’re officially in a recession, with the government’s definition being two consecutive quarters of negative GDP growth.
Monday (7/25): Chicago Fed National Activity Index
Tuesday (7/26): Consumer Confidence Index, New Home Sales, S&P Case-Shiller National Home Price Index
Wednesday (7/27): Durable Goods Orders, Fed Chair Jerome Powell Press Conference, Fed Funds Target Rate
Thursday (7/28): Gross Domestic Product (GDP)
Friday (7/29): Consumer Spending, Disposable Income, Employment Cost Index, PCE Inflation Index, PCE Price Index, UMich Consumer Sentiment
What We’re Watching:
Gross Domestic Pandemonium: After a cripplingly bad GDP report last quarter (well below expectations), analysts are on the edge of their seat for Thursday’s release. Consensus estimates have us narrowly avoiding a recession, with GDP growth of +0.3%. Our hunch is that it creeps negative — officially putting us in an economic recession. Let’s wait and find out!
Summer in Michigan is Splendid: But that doesn’t mean that the UMich Sentiment Index is looking very pretty. The last two readings of the monthly survey for consumer confidence have been brutal. Considered a quality bellwether for the future state of the economy (specifically the retail space) — we want a good number here.
Losing Confidence: Along a similar vein to the metric above, the Consumer Confidence Index (CCI) provides an indication of future developments of households’ consumption & saving, sentiment on the general economy, unemployment, and capability of savings. The U.S. usually prides itself on being ahead of the world average, but we’ve been well below it since early 2021.
Events Driven Winners:
What specific events are moving stocks the most?
Our friends at LevelFields scrub through thousands of data points each week to determine how events impact stock prices.
While you may not be familiar with some of these companies, check out the top two biggest movers of the entire last week — both from hiring new CEOs! It can often feel mundane following the c-suite activity of companies, but thankfully LevelFields makes it easy. We highly recommend checking out their site, joining their weekly mailing list, and using their incredible alerts!
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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.