Equities are mixed in the wake of some big earnings news, with select tech sector names down and other names up. Crude oil is slightly higher, Treasuries are slightly lower, and gold and silver are flat along with the dollar.
On the news front...
We got a slug of big earnings news in the last 24 hours. Search giant and Google parent Alphabet (GOOGL) reported better-than-expected profit and revenue, but its shares slumped since Google Cloud sales didn’t live up to expectations. On the flip side, shares of enterprise software and Artificial Intelligence (AI) leader Microsoft (MSFT) popped after it reported stronger-than-expected profit and Cloud computing results. Call it a case of the “Haves” and the “Have Nots.”
In China, government officials are trying to jumpstart the economy with more stimulus – around one trillion yuan, or $137 billion, in 2024. Chinese President Xi Jinping is showing his willingness to abandon China’s long-standing goal of keeping the budget deficit-to-GDP ratio at 3% or lower. That, in turn, signals how seriously concerned the powers-that-be are about a real estate and construction sector downturn along with a slumping stock market.
The Wall Street Journal has another great story today about how the 60/40 portfolio – 60% stocks, 40% bonds – hasn’t been working, and how that’s leading many investors to question the approach. But the solutions it offers – regular rebalancing, owning some T-bills now that yields are higher, focusing on parts of the market that have lagged, like emerging market and value stocks – may not go far enough.
A big area of focus at the Inside Alternatives conference we co-hosted with Financial Advisor magazine earlier this month was how investors can mix in alternative investments to improve results. Many of them are less correlated to stocks and bonds, and more appropriate in a higher-inflation, higher-rate world like this one. As I said in my opening remarks:
“Many high-net-worth investors have already been migrating from a traditional 60/40 approach to a 50/30/20 model featuring alternatives. This recent activity will likely spur even more client interest in assets that provide the benefits of diversification, lower volatility, and alternative income streams.”