Lower GDP and Foregone Profit Expectations from Alphabet, Microsoft and Meta: Forbes AI Newsletter – August 5

TL; DR

  • US GDP declined for the second consecutive quarter, declining 0.9% year over year.
  • Alphabet, Microsoft, and Meta all missed earnings expectations in the second quarter, with Apple and Amazon beating their expectations.
  • Large-cap stocks can be in a relatively outperforming period given the rate of economic growth that is being experienced at the moment.
  • Top weekly and monthly trades

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Major events that can affect your wallet

US Q2 GDP numbers were released this week, with the widely used measure of economic growth declining at an annualized rate of 0.9%. This is the second consecutive quarter of decline in economic activity, with the first quarter contracting at an annual rate of 1.6%.

Traditionally, two consecutive quarters of economic growth would indicate an official recession, but the current definition is a bit more complicated. The National Bureau of Economic Research (NBER) is now tasked with determining when the economy will officially enter a recession, and they have so far refrained from announcing it.

NBER’s mission is to look at a wide range of data to determine the overall health of the economy. One of the main factors at the moment is that the job market is very strong. Job creation numbers are high, overall incomes are increasing and consumer spending has remained stable.

Weak economic growth isn’t necessarily a bad thing right now. The fourth quarter of 2021 saw GDP growth of 6.9% in the US, and this rapid rise was a contributing factor to the record-high levels of inflation we are now seeing.

The Fed specifically targets slowing economic growth through its current interest rate policy, in an effort to bring down these high rates. We may start to see the impact of these measures on inflation in the coming months and all eyes will be on the July numbers when they are announced on August 10.

This week saw some major earnings announcements from some of the world’s largest and most followed companies.

The Google
The Google
Parent company Alphabet missed revenue forecasts very slightly, but managed to increase revenue 13% compared to this time last year. Although lost, the news was well received by the market and the stock jumped 3% in after-hours trading.

The increase in revenue provided some relief that Alphabet was able to weather in a difficult economic environment, on the back of significant volatility in the technology sector.

Microsoft didn’t do quite so well, with an even bigger profit loss as its shares fell 1.2% in after-hours trading. Revenue growth remained solid at 12% year over year at $51.9 billion, but that was behind analysts’ estimates of $52.3 billion.

The main factor in the error was the growth of Azure and cloud services. And while it’s still growing at 40%, it didn’t live up to expectations of 43.1%.

Facebook’s parent company Meta also suffered a significant loss in the second quarter, with revenue and earnings falling short of analyst estimates. Most worrisome was the loss of monthly active users and average revenue per user, as Mark Zuckerberg issued surprisingly poor guidance for the coming quarters.

It wasn’t all bad news, though, as both Apple and Amazon beat analyst estimates for revenue growth. Apple also beat expectations on earnings, and Amazon’s numbers slipped due to its investment in electric car maker Rivian, with the rest of the core business performing well.

Overall, the numbers are encouraging for the sector given the level of pessimism that dominates the market at the moment. Significant growth is still being generated in traditional profit centers, as revenue streams such as cloud services provide new avenues for company value.

This week’s hottest topic from Q.ai

We are now in a period of low economic growth. In fact, as shown above, it has been negative for the past two quarters. Perhaps this situation will not change quickly, and even if the numbers return to positive territory, they are not likely to be very high.

In an environment of low corporate profits and low economic growth, small businesses tend to be hit the hardest. Small companies often underperform large companies in this type of economy, because they have a lower track record and a less diverse revenue model than large companies that have been around for a long time.

So, looking into the future, while the market as a whole can continue to experience volatility, there is an opportunity to make money based on this relationship between uppercase and lowercase. We created the Big Capital Toolkit to bet on the valuation divergence between these two market segments, rather than betting on the direction of the market as a whole.

This means that regardless of whether the broader market is up, down or flat, investors can make money if the big companies outperform the small ones.

The mechanisms behind this trade are somewhat complex, but in short, we keep a long position in uppercase and short position in lowercase uppercase. We are using our AI to rebalance this weekly trade to maintain an optimal balance for long and short trades.

best business ideas

Here are some of the best ideas our AI systems recommend for the next week and month.

Carnival Shoes (SCVL) – The shoe retailer is one of our stores Next week’s highest purchases With a rating of A in value for quality and technologies and B in growth and low volatility in momentum. Revenue was up 14% year over year through the end of April.

Evofem Biosciences (EVFM) – Women’s health company Evofem Biosciences A Top shorts for next week With our AI rated them an F in the Low Momentum Volatility Factor, as well as an F in the Technical Items. The company’s earnings per share have fallen 28.46% over the past 12 months.

Enlink Midstream (ENLC) – The natural gas product is A Top buy for next month With A in quality value and B in low momentum and growth volatility factors. Analysts expect revenue growth of 20.03% in 2022.

Calithera Biosciences Inc (CALA) Our biopharmaceuticals keep working Top shorts for next month And our AI ranks it as F in quality value and D in low momentum volatility. EPS was – $28.78 in the 12 months to March 31, 2022.

Our artificial intelligence Highest ETF Trading for the Next Month It is an investment in the oil, gas, mining and Brazilian market, with short fixed overdraft interest. top buys are SPDR S&P Oil & Gas Equipment & Services ETF and iShares MSC
SC
I Brazil ETF and VanEck Gold Miners ETF. top short They are the iShares 1-3 Year Treasury Bond ETF and the Vanguard Short-Term Bond ETF.

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