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MARKET UPDATE: 8.17.22
Quarter 2 Market Update 2022
Quarter 2 Summary:
During this quarter shares and bonds have been under significant pressure. The Federal Reserve has put out rate increases (125 points) and signaled that these hikes are just the beginning. In response to the Federal Reserve and current market trends, investors have focused on inflation. As the risk of recession looms, investors have included costs of interest rate rises.
Stocks have been in a bear market during Quarter 2, meaning investment prices have experienced a prolonged drop. The S&P 500 has dropped by a value of 16.1%, the most significant decline since Quarter 1 of 2020. In June, the United States hit a 9.1% inflation rate, the highest in 40 years.
Most sectors were impacted similarly, but those invested in utilities had the most to gain this quarter.
Following a bear market, rising inflation, and hiked rates, recent reports have been a cause for optimism. The Consumer Price Index and Producer Price Index have lowered after a steady increase. While this is a great first step in the right direction, don’t hold your breath! Inflation remains high and the Federal Reserve is expected to continue rate increases.
A lowered CPI is suspected to be driven by a decrease in fuel and energy prices. A similar impact was made on the PPI, but also, producers have gained from the improvement of supply chains.
This is encouraging, but the Federal Reserve has stated they need “clear and convincing evidence” that this progression is sustained before rate hiking will slow.
Salvatore Ferragamo x FARFETCH
Italian fashion house, Salvatore Ferragamo, has partnered with luxury online fashion platform, FARFETCH, to boost their online profitability and engage with a more youthful audience. José Neves, the founder, chairman, and CEO of FARFETCH said,” Ferragamo has a wonderful heritage of creativity and craftsmanship and I am hugely excited about the opportunity to take it to a unique new audience globally.” Ferragamo has shown their excellence and timeless quality over the years, but have recently faced trouble attracting a more youthful base. By leveraging FARFETCH’s far reach and online presence that is global, Ferragamo will be able to increase growth and target their designed audience, millennials and Gen-Z.
Optimism Sparks in Apparel Exports
Fast Retailing, a fashion conglomerate with brands UNIQLO, Theory, Helmut Lang and more, announced exciting expansion news for their brand GU. The popular brand in China, Taiwan, and Hong Kong has plans to move out West. The company will establish its first store in the United States, debuting in Soho, New York. In a trial run, the brand will aim for a more international presence in the form of a pop-up location. "It is a great honor to be opening our first store in the United States. New York is a place where people with diverse backgrounds come together from around the world, an exciting city where fashion, art, music, and other varied cultural elements intersect”, said CEO, Osamu Yunoki. This aligns with their mission statement, “Fashion with More Freedom.”
Stocks to Watch
Nordstrom: (NYSE: JWB)
Share Price: $24.92
Market Cap: $4.00B
Backstory: Founded in 1901 in Seattle, Washington, Nordstrom has sold shoes for over a century. Now the large retail store offers apparel, cosmetics, and accessories as well and operates in over 250 locations. Nordstrom became publicly traded in 1971 when it was listed on NASDAQ under the name NOBE. As of 1999, Nordstrom now trades on the New York Stock Exchange. On March 20, 2015 JWN reached a record high closing price of $64.30. JWN’s 52-week low price is $18.65, which is 25.2% lower than the current share price.
Current News: Retail can be a tricky category to invest in, but Nordstrom stands out in a volatile market. Nordstrom’s return on equity is 74.13%; net margin being 2.37%. During the previous quarter, Nordstrom outperformed analysts' predictions, bringing in a revenue of $3.57. The recent quarterly earnings report shows that Nordstrom may succeed and outperform the market, despite high inflation.
Boot Barn Holdings Inc (NYSE: BOOT)
Share Price: $73.01
Market Cap: $2.18B
Backstory: Boot Barn began as one store in 1978 and has since become the “largest western and workwear retailer” in the United States. Boot Barn Holding Inc joined NYSE in 2014. Boot Barn has a 50 day moving average of $71.29.
Current News: Boot Barn has caught the eyes of many research analysts this month. It has suffered from a rough three months, with the share price down over 30%. But, investors might be turning down a great opportunity by overlooking Boot Barn. Boot Barn Holdings does not pay a dividend to shareholders. By reinvesting profits back into the company at a high rate of return, earnings have been able to grow significantly.