💴 Earnings (Goldman Sachs, Walgreens, and more)

and investing when the market's high

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Good morning investors! This issue will cover the latest earnings, including some international names and talk about investing when the market is at a high.

Today we cover:

  • People are worried about debt

  • Earning reports (Goldman Sachs, Walgreens, and more)

  • Investing. whenthe market is high

📊 Economy and News 

Rising Debt and Uneven Inflation: Financial Strain Grows for Lower-Income Americans

Americans are generally feeling secure in their jobs, with expectations of earning and spending more than they did before the pandemic. They also believe inflation is not worsening significantly. However, debt balances are growing, and many are becoming increasingly concerned about managing their financial obligations.

The average perceived likelihood of missing a minimum debt payment over the next three months has risen to 14.2%, marking the highest level of concern since the early stages of the pandemic in April 2020. Outside of that period, this is the highest delinquency expectation since January 2017.

While the US economy remains strong, many people still feel the pressure of inflation, which continues to eat into wage gains. Despite steady employment and rising wages, inflation is affecting the purchasing power of many Americans, leaving them uneasy about their financial outlook. The effects of high inflation have been more severe for some, particularly lower-income households, leading to a widening income inequality gap.

Research shows that since 2005, prices for the lowest-income households have risen by 64%, compared to a 57% increase for the highest-income households. Data from the New York Federal Reserve also indicates that while delinquency expectations increased slightly for higher earners, those earning less than $50,000 a year face a much higher probability of missing payments, with this figure now standing at 20%.

Global hits:

Asia disappoints: Chinese stocks declined yesterday with Mainland China's CSI 300 fell by 2.66%, closing at 3,855.99, while Hong Kong’s Hang Seng index dropped 3.67%, finishing at 20,318.79.

The downturn followed the release of China’s disappointing September trade data after markets closed on Monday, with exports increasing by just 2.4% year-on-year and imports rising by a mere 0.3%, both falling well short of expectations.

Meanwhile, revised trade figures from South Korea confirmed a trade surplus of $6.7 billion in September, unchanged from preliminary data, and significantly higher than August’s $3.7 billion.

South Korea’s Kospi advanced by 0.39%, closing at 2,633.45, while the small-cap Kosdaq gained 0.4% to reach 773.81.

Japan’s Nikkei 225 rose by 0.77%, closing at 39,910.55, and the broader Topix increased 0.64%, ending at 2,723.57.

Australia’s S&P/ASX 200 also posted gains, rising 0.79% to end the day at 8,318.4.

📈 Stocks

S&P 500 5,815.26 (+%) (-0.76%)
DJIA 42,740.42 (-0.75%)
NASDAQ 18,315.59 (-1.01%)
BRENT CRUDE 74.81 (-3.22%)
* Prices as of Oct 16th, 12:20 AM UTC

Earnings are here

Goldman Sachs exceeded expectations for its third-quarter earnings and revenue, driven by strong stock trading and investment banking performance.

  • Earnings: $8.40 per share vs. $6.89 estimate

  • Revenue: $12.70 billion vs. $11.8 billion estimate

Profit surged 45% from a year ago, reaching $2.99 billion, with a 7% revenue increase to $12.7 billion.

Ericsson reported third-quarter adjusted earnings of 7.327 billion Swedish crowns (approximately $0.7 billion), surpassing the forecast of 5.75 billion crowns. North American sales grew over 50% year-on-year, boosted by a key contract with AT&T.

Bank of America also beat estimates for third-quarter earnings, reporting:

  • Earnings: 81 cents per share vs. 77 cents estimate

  • Revenue: $25.49 billion vs. $25.3 billion estimate

Net income fell 12% to $6.9 billion, impacted by higher loan loss provisions and rising expenses, while revenue rose less than 1%.

Walgreens posted better-than-expected fiscal fourth-quarter results, thanks to cost-cutting efforts. The company plans to close 1,200 stores over the next three years, with 500 set for closure in fiscal 2025, aiming to boost adjusted earnings and cash flow. Walgreens operates around 8,700 U.S. locations, a quarter of which are unprofitable.

ASML said it expects net sales for 2025 to come in between 30 billion euros and 35 billion euros ($32.7 billion and $38.1 billion), at the lower half of the range it had previously provided, warning China is expected to account for around 20% of the company’s total revenue for the next year. The Dutch company has previously said that 49% of its sales come from China.ASML said that the early publication of its results was due to a technical error which saw it erroneously publish the report on a part of its website. The news sent the stock down -15%.

ASML’s report proves that China does impact US stocks and our subscrivers seem to be well aware of this as 90% voted ‘yes’ in yesterday’s poll.

Good to know: Boeing said it could raise as much as $25 billion to shore up its balance sheet. The company said in a separate filing that it has reached a $10 billion credit agreement with banks.

Check this: Lufthansa fined a record $4 million for denying boarding to 128 Jews who didn’t know each other .

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💵 Personal Finance

Should you buy a stock after it hits a new high?

As stocks continue to hit new highs, many investors are contemplating whether to stay invested or wait for a potential pullback. Historical data suggests that stocks tend to perform well after reaching new highs, often climbing at an accelerated pace. For instance, the S&P 500 has historically returned an average of 12.7% in the 12 months following an all-time high, slightly outpacing its overall average return of 12.4% for all other 12-month periods.

Selling stocks immediately after they hit new highs could mean missing out on significant returns. This year alone, the S&P 500 has reached over 30 new intraday highs, a pattern that isn't unusual. Since the 1980s, the index has recorded 40 or more new highs in a single year nine times.

While the data points to a trend of continued growth following record highs, it's important to remember that returns are never guaranteed. Stocks will eventually experience downturns, so it's wise to consider other market factors before making investment decisions.

Here’s a video on a similar topic:

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Nothing in this newsletter is financial advice. Always do your own research and think for yourself.