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MARKETS: More upbeat earnings, market rotation, and tech woes

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4 years ago

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Last year’s best stock performers continue to get hammered as the rotation out of tech stocks continues. Of course, investment folk always feel the need to wrap these declines into a digestible narrative, so the violent market moves are easier to comprehend.

This time around, the majority of the blame has been attributed to a growing fear of higher inflation and rising interest rates. In reality, these growth tech names simply couldn’t maintain a perpetual state of hyper-growth. As I mentioned last week, a pullback was always on the horizon.

Market participants continued to favour value and cyclical stocks despite a strong earnings season for many tech names. Inflation fears were dampened by a less than impressive jobs report, driving interest rates lower.

Commodities

Supply bottlenecks and post-pandemic demand have sent commodity prices soaring to their highest levels in almost a decade.

Metals, food, and energy are at the fulcrum of any growing global economy. Throw some supply-side problems into the mix, and you have a perfect storm.

Lumber has more than tripled in price since last year. Copper has jumped almost 40% since the start of the year and is now up over one hundred percent from its pandemic low point. While the supply-side contraction will likely be short-lived, this high demand, low supply environment looks set to keep commodity prices elevated over the near term.

Crypto

Ethereum (Ether), the world’s second-largest Crypto, moved above the $4,300 mark for the first time this week, doubling in price in just over a month. Ether continues to emerge from Bitcoin’s shadow as more and more investors look to other cryptocurrencies for returns.

Apparently, the relatively stable price of Bitcoin over the last week or so is too mundane for the get rich quick, volatility hungry crypto elite.

Market Outlook

With commodities continuing to soar and Washington debating even more stimulus, inflation is still the market buzzword of choice.

The Fed is insistent that the recent spike in commodity prices and wage pressure will be short-lived. They also have continued to highlight their willingness to let inflation run above target for a period as the economy revives.

Despite the leading indicators signalling a pick-up in inflation, many market participants are now making a case for a more benign inflation outlook. Traders have trimmed bets on rate hikes, while Goldman and Pimco have both softened their inflation outlook.

While fiscal stimulus, an even more supportive Fed policy, supply-side contractions and pent-up demand will likely bring near term inflation. Secular trends such as technological innovation and demographics will ensure these inflation figures level out over the medium/long term.

In short, inflation is likely to rise above the anemic levels it has been anchored to over the past decade, but this inflation jump won’t bring us back to the ‘out of control’ numbers experienced during the 1970s, despite what some doomsday economist would lead you to believe.

The past two weeks have probably been traumatic for anyone playing it fast and loose with the big winners of last year. While these losses can be painful, it highlights the need to stay focused on the core principles of long-term investing.

Don’t get caught up on short-term moves. Focus on your long-term time horizon
Make sure you have adequate diversification
Be patient: There will be periods where markets fall over 10%, that is a guarantee
Stay committed to the companies you believe in
Be an opportunist: Use market corrections to build out positions in your favourite stocks.

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Cost of agricultural land set to increase by 8% this year

By Ted Healy of DNG TED HEALY The results of a survey on agricultural land values conducted by the Society of Chartered Surveyors Ireland (SCSI) was published earlier this week. […]

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2 years ago

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1 May 2023

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By Ted Healy of DNG TED HEALY

The results of a survey on agricultural land values conducted by the Society of Chartered Surveyors Ireland (SCSI) was published earlier this week.

It predicts an increase in land values by an average of 8% this year and an increase of 14% on average in rental values.

The report titled, ‘SCSI/Teagasc Agricultural Land Market Review & Outlook Report 2023’, analyses the agri sector performance over the past year and projects how it will perform over the next 12 months.

In all 134 agri professionals and valuers were surveyed, who expect the outlook for dairy farmers to ease and a challenging future for sheep and tillage farming.

Rental Land values in Munster increased by an average of 13% in the last year with a 9% increase experienced in Leinster.

The report indicates that the average non-residential farmland prices in 2022 ranged from €5,564 per acre for poor quality land – up five percent from €5,308 in 2021 – to €11,172 per acre for good quality land – up two percent from €10,962 the previous year. Strong demand from dairy farmers for good quality land is driving the market.

The majority of those surveyed believe there is likely to be an increase in demand from dairy farmers to purchase farmland in 2023.

One point to note however, is that changes to the European Nitrates Directive, particularly measures aimed at protecting water quality, may have an impact on land prices, especially rental prices.

In order to maintain current levels of milk production – and to comply with the directive – many dairy farms will need to either increase their land area or reduce milk production.

The Residential Zoned Land Tax (RZLT) is also coming down the line at an alarming rate, farmers have until May 1 to make a written appeal. Under the new legislation farmers owning currently zoned land face an annual tax bill of 3% of the market value of their zoned land.

This will result in countless numbers of landowners facing crippling tax bills from next year on. It is expected that this new tax may bring forward extra land sales later this year before the tax takes hold.

The IFA (Irish Farmers Association) have this week sought a senior counsel review of the legislation governing the Residential Zoned Land Tax.

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What is a Fire Safety Certificate?

By John Healy of Healy Insurances A Fire Safety Certificate is an official document that verifies if a building design submitted as part of an application will, if constructed in […]

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2 years ago

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1 May 2023

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By John Healy of Healy Insurances

A Fire Safety Certificate is an official document that verifies if a building design submitted as part of an application will, if constructed in accordance with the plans and specifications approved by the Building Control Authority, comply with the requirements of the Building Regulations.

Fire Safety Certificates are issued by a Building Control Authority. The certificate confirms that the building has adequate escape facilities and that the building is designed in a way that prevents and limits the spread of fire. While all buildings must comply with the fire regulations, not all buildings will need a Fire Safety Certificate.

Which developments require a Fire Safety Certificate?

The Building Control Act (1990 & 2007) specifies the development types that require Fire Safety Certificates:

· Works in connection with the design and construction of a new building
· Works in connection with the material alteration of a day centre, a building containing a flat, a hotel, hostel or guest building, an institutional building, a place of assembly, a shopping centre
· Works in connection with the material alteration of a shop, office or industrial building where additional floor area is being provided within the existing building or where the building is being sub-divided into a number of units for separate occupancy
· Works in connection with the extension of a building by more than 25 square metres
· A building as regards which a material change of use takes place.

Some developments are exempted from requiring a Fire Certificate and can include:

· Certain single storey agricultural buildings
· A building used as a dwelling (other than a flat)
· A single storey domestic garage
· A single storey building ancillary to a dwelling which is used exclusively for recreational or storage purposes or the keeping of plants, birds or animals for domestic purposes and is not used for any trade or business or for human habitation
· Works in connection with a Garda station, a courthouse, a barracks and certain government buildings.

If a building is inspected by a member of the building control authority and it transpired that no Fire Safety Certificate is in place, the building could be subject to closure. For more information see www.kerrycoco.ie/home3/building-control/firesafetycerts.

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