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Today's big stories

Investors pulled money out of every market last week, according to a new report
Ethereum is up against some tough competition, so we’ve looked into whether you should still buy into the blockchain – Read Now
Japanese automaker Honda gave a mixed results update

All Together Now

What’s Going On Here?

It’s nice to know we can all agree on something in these divisive times: investors pulled money out of every market last week, according to a Bank of America report out on Friday

What Does This Mean?

It’s not exactly a ringing endorsement for the global economy when investors are bailing on everything all at once, but that’s exactly what happened between May 4th and May 11th. Global bonds lost a net $11 billion even after higher US interest rates pushed up yields, while cash and gold funds hemorrhaged $20 billion and $2 billion respectively. Stocks weren’t spared either: investors pulled $6 billion out of the market, most heavily those of European and emerging market (EM) companies. That makes sense: the Russia-Ukraine conflict is leaving Europe’s investors with a nasty taste in their mouths, while EMs are at risk from high food and energy prices, the rising cost of debt, and China’s economic slowdown.

Why Should I Care?

Zooming in: Tech, tech, tech… kaboom.
Tech stocks were particularly badly hit, suffering their biggest weekly withdrawal of the year at over $1 billion. Not that it’s especially surprising: the tech-heavy Nasdaq 100 index did just post its sixth-straight weekly drop, as the Federal Reserve’s aggressive rate hikes push investors to dump expensive-looking stocks (tweet this). Even Apple – a supposedly stable blue-chip company – is down 20% from its peak, putting it squarely in bear market territory.

For you personally: Buy the dip?
Hey, look on the bright side: the analysts behind the report have pointed out that the fact that investors are pulling money out of every market – safe havens and risky assets alike – could be a sign of “true market capitulation”. In other words, sentiment is now so negative that we might be near the bottom of the market – something you might be tempted to capitalize on…

You might also like: Is Ray Dalio’s “bubble indicator” telling you to buy the dip?

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🙋 Ask a question

Analyst Take

Where Will Ethereum Go Next?

By Jonathan Hobbs, Analyst

Where Will Ethereum Go Next?

Look, it’s no secret that Ethereum is a major player in the crypto market.

But it’ll need to stay on its toes if it’s going to have any chance of keeping it that way, with major upstarts like Solana and Avalanche nipping at its heels.

So that’s what it’s doing: it’s switching to a proof-of-stake (PoS) blockchain, which means there’ll be no more energy-sucking, competitive ether mining.

PoS will mean Ethereum consumes far less electricity. And validators, unlike miners, won’t have to fork out on expensive mining equipment and cover sky-high electricity bills.

That’s when Ethereum can move onto the next 2.0 upgrade: sharding. That is, making Ethereum transactions a lot faster and cheaper.

So that’s today’s Insight: how Ethereum got here, and where it’s going next.

Read or listen to the Insight here

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Chip Happens

What’s Going On Here?

Honda gave a mixed results update on Friday, with the Japanese carmaker unable to shake the same nagging problems that have been lingering for months now.

What Does This Mean?

First, the good news: Honda sells a lot of cars internationally, meaning its revenue is worth a lot more when it’s converted back to a flailing yen. That pushed up its full-year sales by a better-than-expected 10% from the year before. But there are reasons to be nervous: the company sold just 4.1 million cars last financial year – fewer than it did the year before and the year before that. That suggests these supply chain disruptions and chip shortages aren’t going away, and won’t be anytime soon. Layer on Chinese lockdowns and higher raw material costs, and the company’s expecting its operating profit to shrink 7% this year from last – not exactly the 8% increase analysts were banking on…

Why Should I Care?

The bigger picture: The yen gives with one hand.
The weaker yen comes with a downside: it makes already-pricey imported commodities even more expensive, which could end up denting Japanese carmakers’ profit margins. That’s partly why they all seem to be letting investors down right now: Nissan’s profit projections fell short of forecasts too, and Toyota – renowned for its strict cost management – is predicting that its operating profit will drop by 20% this financial year.

For markets: Expectations probably shouldn’t be this high.
Japanese companies have another problem on their hands: the gap between consumer inflation and producer inflation – which reflects the rise in prices that factories charge wholesalers – hasn’t been this big since 1980. That suggests Japanese companies are going to have to take a hit to their profit margins, even as analysts’ estimates for Japanese company profits are at their highest in 17 years, according to Bloomberg. So whether analysts end up downgrading those estimates or companies end up missing them, investors are going to be disappointed.

You might also like: How to profit if the yen bounces back.

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🙋 Ask a question

💬 Quote of the day

“There is no royal flower-strewn path to success.”

– Madam C.J. Walker (an African American entrepreneur, philanthropist, and activist)

Tweet this

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🎯 On Our Radar

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🌎 Finimize Live

🎉 Coming Up This Week

All events are in UK time.

📈 How To Identify High Growth Metaverse Stocks: 12pm, May 16th
🙌 How To Invest In Community-Led Projects: 5pm, May 16th
🌎 How To Invest In The Global Chip Shortage: 5pm, May 17th
🏡 How To Buy A Digital Condo: 12pm, May 18th
🚗 The Leaders Of The EV Revolution: 5pm, May 19th
♻️ How To Pick Winning ESG Stocks: 5pm, May 20th

💪 And Then After That…

🧐 A Guide To Investing In Derivatives: 6pm, May 23rd
📈 How To Invest Thematically: 12pm, May 24th
🎨 How To Build And Manage A Balanced NFT Portfolio: 5pm, May 24th
📈 The Future Of The M&A Market: 5pm, May 26th
🏘 How To Diversify Your Crypto Investments Through Commercial Real Estate: 6pm, August 3rd
🏡 Tokenizing Real Estate: 6pm, September 13th

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