Hello! As summer starts to slip away and September creeps up on us, we’re looking at stocks, Snapchat and Starbucks — all with the great help of the newest chart-lover in the content team. Welcome Will!
The US S&P 500 Index fell some 23% in the first six months of the year, as biting inflation gave policymakers few options but to raise interest rates, and raise them quickly.
Over the summer, equity markets recovered somewhat, as new evidence suggested that inflation might have peaked. However, recent investor optimism was extinguished on Friday by Fed chair Jay Powell, who poured cold water on the idea that the Fed might slow down. Powell warned that more rate rises are coming and that there will be "some pain" for households and businesses. US stocks fell more than 3% almost immediately after he finished speaking, and have continued to slide further this week.
So, where are we now?
The recent stock market moves left us wondering where equity valuations were. With hundreds of different ways to value stocks, we settled on arguably the simplest: the ratio of total market cap. to GDP. It's a simple metric that compares the total value of public equities with the actual economic output of the country as a whole.
A favorite of a certain Warren Buffett — who celebrated his 92nd birthday yesterday — the indicator currently sits just shy of 170%. On its own that number doesn't mean much, but when placed in historical context it's striking. Even after the recent fall in markets the ratio is still one of the highest on record, north of the ~140% recorded during the dotcom bubble of 2000, and considerably elevated compared to the average since 1995 (109%).
Snap Inc., the parent company of Snapchat, is reportedly set to layoff 20% of their employees, putting 1,200+ people at risk of losing their jobs. Snap's core business — selling ads — has matured significantly in the last 7 years. In 2015 the company made just a few cents from every user, but last year they made more than $3 per quarter for each active Snapchatter. That growth took Snap to more than $4bn a year in revenue, but other projects and runaway expenses have seen the company notch a net loss in 29 of the last 30 quarters.
Out of focus
Snap has been spending big on other projects, many of which appear likely to bear the brunt of the impending layoffs. The company's AR smartglasses, Spectacles, received heavy investment as did Pixy — the company's camera drone which was discontinued after just a few months. Both fell under Snap's grand plan to reinvent the camera — an ambition that so far has contributed to a cumulative net loss of $8.9 billion since 2015.Snap is not the first, and certainly won't be the last, tech company to announce layoffs. Ad giant Facebook saw their ad business shrink for the first time last quarter, and spending on digital ads is likely to continue to soften if the economic headlines remain as gloomy as they have been.
‘Tis the season
Starbucks has announced the return of the PSL, or Pumpkin Spice Latte to the uninitiated, its most-popular seasonal special of all time. The creamy concoction is a signal for devotees that fall has arrived — no matter how early the drink comes in the calendar year.
Despite being derided by some, the PSL has become a staple — or just a meme — of the fall season. Google searches for ‘pumpkin spice’ hit their peak around the late August period, with pumpkin heads keen to get their hands on the first PSL of the season. Further out, interest spikes again around Thanksgiving, when pie-makers presumably start looking for the ideal pumpkin spice blend ahead of the big family gathering.
"Invented" by someone pouring espresso over a pumpkin pie — and deciding that the result would make a good drink — the PSL has become a genuinely substantial product for Starbucks. Reports estimate that the company has shipped more than 500 million of the fall favorites since the drink was introduced in 2003.
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• Are US stocks more expensive than global peers? Who is feeling better about the global economy, businesses or consumers? Where have all the IPOs gone? Macro research house Topdown Charts answers questions like these, with data, in their free Chart Of The Week.**
• 43% of Americans fear that a US civil war is ‘somewhat likely’ in the next decade.
• It might be time to check your old baseball card collection: this one has just sold for a record $12.6m, nearly double the previous record.
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**This is sponsored content.