In this article we examine some of the key market moves from October as well as ponder the future of big tech.
US stocks
After declining 9.34% in September, US markets rebounded firmly last month – with the S&P 500 rising 7.99% during October.
Other benchmarks – like the Dow Jones Industrial Average and Nasdaq Composite also finished the month higher – gaining 13.95% and 3.90%, respectively.
Macro highlights
As US equity markets attempt to find stability, inflation again came in ahead of expectations, with the September CPI print coming in at 8.2% vs the 8.1% economists were expecting. Positively at least, GDP data revealed a return to growth, with US GDP growing 2.6% in the third quarter.
Finally, and as expected, the US Fed raised rates a further 75 basis points at their November meeting – taking the official Fed Funds rate to between 3.75-4%. That’s up from near-zero in November, 2021.
Is the era of Big Tech over?
The latest US earnings season has seen some of the big tech companies which defined the bull-run of the last decade sold off heavily.
This comes as the health of the US and global economy remains a key overhang for markets, with elevated inflation representing a particular – and persistent – challenge for central banks. Broader thematics like digital advertising and the rise of cloud that contributed to many of the big techs ‘over earning’ in the last ten years have weakened in the wake of the economic slowdown we are now seeing.
Despite those headwinds, companies like Apple have moved from strength to strength. By comparison, companies like Amazon and Meta have fared less well – as deteriorating economic conditions and impatient investors weigh on the stocks.
Meta – a long-time market darling – saw its shares plunge 24% in the wake of the company’s Q3 earnings report. Its shares are down ~71% year-to-date to November 1, making it the worst performing of the FAANGs. Meta saw its revenue decline 4% in Q3, average revenue per user (ARPU) is down across all regions, and the company remains committed to its metaverse ambition while its Reality Labs division racked up US$3.6 billion in Q3 losses.
Amazon’s stock was also punished by investors this earnings season – falling 13% following the release of its Q3 report. The tech giant missed analyst revenue estimates both overall and for its much-hyped cloud division, with AWS top-line growth decelerating to 27% in the quarter.
TLDR: As this all unfolds, we could now be arriving in a new era of big tech - one where the near unconstrained growth of the last decade is behind us. And if those days are behind us - what companies, if any, will replace the FAANGs as the growth leaders for the next decade?
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