Week Ahead: Investing Ideas, Earnings Season Checklist. Week ending July 15

?S&P 500 earnings season checklist; 6 things you need to know

1. What do you need to know?

 The biggest S&P500 companies will begin to release their corporate earnings results, releasing their earnings, revenue, cash flow, and profit results from the second quarter (Q2), as well as their outlooks (guidance levels) for the year ahead.

2. Why is earnings season important?

Reporting/earnings season allows investors to gauge how healthy a business is, and what its future looks like.

3. What's happening this week?

 · Some of the US' biggest banks' will release their earnings reports, with results expected from JPMorgan Chase (JPM), Citigroup (C) and Well Fargo (WFC). We will be watching to see if their margins (profits) improved and what their outlooks are.

 · Airlines will also start to fly out their reports; with Delta Air Lines (DAL) on watch. Delta Air Lines shares have gone up by 46% this year. It will be a proxy for what we can expect from airlines for the year ahead.

4. Overall, S&P 500 earnings are expected to fall. But Tech and Airlines could see bright sparks

 · Q2 earnings are estimated to have declined by 7.2% in the quarter (FactSet). If this happens it will be the biggest earnings drop since Q2 2020 of -31.6%.

 · Information technology (Tech), and Industrials (airlines) are expected to report strong earnings as they have issued the highest earnings per share guidance levels for Q2.

5. Where can you expect the most revenue?

FactSet estimates the financial sector will report the highest revenue growth rate out of the eleven sectors, at 7.6%. At the industry level, Consumer Finance (with 14% revenue growth) and Banks (with 14% revenue growth).

So watch key bank stocks, and keep an eye on banking and financial sector ETFs including;

 ·  Financial Select Sector SPDR ETF (XLF)

 · SPDR S&P Bank ETF (KBE)

 · SPDR S&P Regional Banking ETF (KRE)

 · iShares US Financials ETF (IVF)

6. Forward earnings are priced to perfection. Not for disappointment...

The S&P 500's 12-month price-to-earnings (PE) ratio is priced at 18.9 times earnings (FactSet). That's slightly above the 5-year average (of 18.6) and above the 10-year average (of 17.4). What does this mean for investors?

 · If S&P500 earnings fall more than expected, then equities could pull back.

 · If earnings are not as bad as feared, (if earnings don't decline by 7.2%), then equities could rally up. The other major catalysts though; include Fed commentary, the Fed meeting, and key data, such as US inflation data due out this week - See the bottom of this email for more.

?The MOST bought ETFs by moomoo clients...

If we reflect on the most traded ETFs at moomoo this year, we can see there are three types of investors 1- those that are very bullish or bearish on the biggest tech 100 stocks in the US. 2- those that are bullish or bearish on Telsa; and 3- those that want to invest in cybersecurity technology.

1. Bullish and bearish leveraged QQQ ETFs

 · TQQQ is the most transacted upon ETF at moomoo. This leveraged ETF seeks magnified gains and a return that is 3x the return of its underlying QQQ ETF. The QQQ ETF tracks the Nasdaq 100, the largest 100 tech stocks in the US. The TQQQ ETF has gone up by 135%. That means if you invested $500 at the beginning of the year in the ETF, you would have turned $500 into $1,200.

 · SQQQ is the 2nd most transacted upon ETF at moomoo this year. This leveraged ETF seeks to profit from the QQQ falling, and dropping in value on a daily basis. This leveraged ETF is -3x the return of its underlying benchmark. Usually, investors buy a short QQQ ETF to protect their share portfolio against a decline in the market, meaning to 'hedge' their portfolio. If you bought this ETF at the beginning of the year, you would have incurred a loss of 64%, as the market has gone up.

2. Bullish and bearish Tesla ETFs

 · The Daily TSLA Bull 1.5X Shares (TSLL) ETF is one of the most transacted upon ETFs at moomoo. TSLL seeks a daily profit of 150%, of the performance of Tesla (NASDAQ: TSLA).

 · The Daily TSLA Bear 1X Shares (TSLS) ETF is one of the most transacted upon ETFs at moomoo. This shorting ETF, TSLS, seeks a daily profit of 100% of the performance of Tesla, (NASDAQ: TSLA) if it falls.

3. HACK ETF - an investment in global cybersecurity

 · This ETF is one of the most traded ASX-listed ETFs by moomoo clients.

 · The HACT ETF gives investors exposure to the world's biggest cybersecurity companies that are combatting cybercrime. The biggest holdings in the HACK ETF include Palo Alto (PANW), Fortinet (FTNT), and Cisco Systems (CSCO).

 · The HACK ETF has gone up by 17% since the beginning of the year. Over the last five years, the ETF has gone up by 30%.

· Why are investors backing this theme?

As we discussed last week, 'where macro-economic funds go, investments flow'.

 · With the rising prevalence of cyber attacks, we have seen the global governments, the corporate world, and individuals alike stepping up, and doing all they can to protect against cyber hacks.

 · The US government is expected to spend $10.9 billion in FY2023 on cyber defense.

 · The Australian government is projected to spend AU$ 9.9 billion on cybersecurity over the next 10 years.

?Tech, high growth, high PE Stocks are on watch ahead of US CPI

Keep your eyes on US inflation this week ...

 · The economic highlight of the week will be the US inflation data, known as the consumer price index (CPI), which will be released on Wednesday. This will tell us how much consumer prices rose in June.

 · The data is widely expected to show core inflation prices rose by 5% year-on-year to June. The last inflation report showed us that CPI rose by 5.3% YoY.

 · Inflation has fallen steadily since Q4 2022. This is good for tech, high growth, and high price-to-earnings (PE) investors, as it means, the US Federal Reserve can likely take their foot off the gas with interest rate hikes.

What are the implications?

Remember the market is forward-looking, so if core CPI is seen rising 5% YoY, (by 0.3% month on month), as expected, it will be the slowest rate of inflation since 2021. And this ladies and gentlemen could mean the US Federal Reserve might not raise interest rates at their next meeting (later this month).

 · For investors, this means, the market might price in that tech, high growth, and high price to earnings (PE) companies, could see greater earnings ahead, if the Fed won't hike interest rates.

 · However, if CPI comes out stronger than expected, then you might expect Tech stocks, to take a haircut. For investors, there are opportunities either way. If the market is shocked and disappointed, with CPI, there could be an opportunity to pick up some low-hanging fruit, i.e. stocks at a discount.

Stocks and ETFs to watch?

Given the above, it could be worthwhile watching:

 · Nvidia, as its shares are up 190% YTD and it has a PE of 244 times

 · Meta, as its shares are up 141% YTD, and it has a PE of 33 times.

 · Tesla, as its shares are up 122% YTD, and it has a PE of 75%

 · And watch ETFs that track the Nasdaq 100, such as the NDQ, QQQ, and the above-mentioned ETFs including bullish QQQ; TQQQ, and bearish QQQ, SQQQ

Click here to check out moomoo's economic calendar which includes market forecasts.

Happy investing!

The moomoo team