What you missed in April

April market synopsys by ART Invest
Picture composed by the author using Canva

In March, the first in three years, the Federal Reserve approved a 0.25 percentage point rate hike, with insinuations of successive ones at each of its remaining meetings for the year.

Thus, funds rate is expected to hit 1.9% by the end of 2022. Those hikes are intended to contain the risks of rising inflation which has been increasing at its fastest rate since the 1980s, most especially food and shelter prices.

FED rate by ART Invest
Source: CNBC

The Russian invasion of Ukraine has also not helped matters. It has caused oil prices to surge, driving gasoline to all-time highs. Expectedly, the stock market has continued to respond to all the associated economic anxieties and turmoil.

The S&P500 plunged 9% in April, amidst persistently rising inflation

In April, the S&P500 index declined by a whopping 8.8%, its worst since the devastating coronavirus bloodbath of March 2020. On Friday, April 29 alone, it fell by 3.6% as Amazon and Apple posted Q1 results that reflected mounting inflation and supply chain concerns.

The benchmark index is now down by over 13% YTD, cementing investors’ fear that all is not well and the economy might be about to take a hit. Re-emerging COVID cases in China and the lingering Russia — Ukraine War, contributing to supply chain disruptions and rising food and energy prices, are having negative consequences for corporate profits.

S&P500 chart by ART Invest
Source: The New York Times

Americans’ consumer spending abilities are being battered by runaway inflation and spiking interest rates. In a relentless bid to stamp out COVID outbreaks, China, on Friday April 29, declared lockdown measures in at least 27 of its cities, including Beijing and Shanghai, its two biggest. Those measures affected the operations of many businesses such as the automakers Volkswagen and Tesla and the electronics company, Pegatron, worsening the already fragile supply chain.

Moreover, many experts are afraid the aggressive Fed rate hikes might precipitate a wide economic meltdown. After all, borrowing costs are already rising at an unprecedented pace.

Mortgage rates, for example, were just 3.2% at the beginning of the year. Now, they are over 5%. However, profit growth has not been largely affected as companies are passing the rising costs to consumers, earnings reports show. As a result, majority of companies still did better than analysts expected.

Netflix, Amazon, General Electric, and Apple fell

Nevertheless, many other companies have not been as lucky. On Wednesday, April 20, Netflix fell by over 35% after it announced that it foresaw a loss of at least 200,000 subscribers in the first three months of the year and an additional 2 million over the next quarter. Amazon also slid by roughly 24% in April amidst rising labor and fuel costs which culminated in its first quarterly loss in seven years.

For the month, General Electric fell by 18.5%; Apple, by 9.7%. The Russia — Ukraine War, expectations of Fed rate hikes, and the economic effects of the Covid-19 lockdowns in China which have led to disruptions in deliveries have been the major cause.

Until the international flow of goods and the inflationary picture improve, coupled with expectations of further Fed rate hikes, the future of financial markets remains uncertain for now.

Elon Musk acquired Twitter in a ground-breaking deal

In perhaps the most groundbreaking event of the month, a classic leveraged buyout arrangement, the board of Twitter accepted an offer of $54.20 per share from Elon Musk to acquire the company which he seeks to take private.

He stated he wants to “make Twitter better than ever by enhancing the product with new features, making the algorithms open source to increase trust, defeating the spam bots, and authenticating all humans.”

This May, let’s see how fast and far Elon will start and go with that!

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