Once again, earnings season is upon us, and as expected, results have been a mixed bag, with companies reporting better, below, or in line with expectations. Stocks with positive outlooks and better-than-expected returns have experienced a price jump, while stocks with less stellar performance are experiencing sell-offs. Over the past month, corporate earnings have shaped the stock market’s environment, making it dynamic and more frequently volatile.
Macroeconomically, the campaign to fight US inflation by increasing interest rates has been on for a year and a half. On July 26, 2023, the Federal Reserve announced another quarter-point hike, bringing it to a 5.25% – 5.5% range, its highest level in over 22 years. The Fed is still focused on reducing the inflation rate from 3.00% to 2.00%, so we expect further moderated hikes in interest rates in the coming months.
Asset Classes Overview
Stocks
In July, the stock market experienced mixed performance across different sectors. Big tech companies continued to deliver outstanding earnings results, driving the US stock market upward. The S&P 500 index earned 3.11% in gains, indicative of what the stock market did this past month. Rise Equity’s portfolio also demonstrated a strong performance in July 2023, posting a gain of 4.67%, beating the benchmark index.
On big tech earnings, Google received a warm reception for its stellar Q2 earnings. In contrast, Microsoft’s earnings were not impressive, as they reported lower revenue from cloud and AI segments. Amazon also delivered impressive results, reporting an 11% rise in net sales from Q2 of 2023. However, Apple failed to meet expectations due to sluggish growth in iPhone sales, earmarking its third successive quarterly drop in revenue.
We are scrutinising the earnings outcomes of our portfolio firms and will proceed to make necessary modifications to the stock portfolio accordingly. As we navigate the future, monetary policy decisions from The Fed, especially those about further rate hikes, will remain crucial factors to monitor. Regardless, we remain optimistic about the prospects of our stock portfolio and will continue to make strategic decisions to optimise our returns. We encourage you to approach your investments with a long-term perspective and a diversified portfolio strategy.
Real Estate
Our Rise Real Estate portfolio generated 1.05% in rental income this past month. Rising interest rates have trickled into higher mortgage rates, higher home prices, and higher rental income, which we have benefited from.
Currently, the median sales price of a home in the US is 560% of the median household income. In 2008, it was 360%, showing that this is the least affordable housing market in history, making it more expensive for individuals to finance a home purchase. As a result, potential homebuyers are delaying or reconsidering buying a home due to increased borrowing costs, leading to an uptick in demand for rental properties as more people opt to rent rather than buy, boosting rental demand.
With a soft landing in sight for the economy due to strong economic growth figures and declining CPI figures, our real estate asset portfolio provides stable and consistent cash flow to investors and a haven in this inflationary period. You can own real estate assets by investing in our real estate portfolio or through a direct purchase in your name.
Fixed Income
Our Fixed Income portfolio returned 0.83% in July. Our outlook for fixed income remains positive, as we expect the market to continue to strengthen.
As we look ahead, we anticipate developments in various sectors to continue to shape market trends. Stay vigilant and informed, and remember that wise investment decisions are built upon the foundations of research and analysis and a willingness to adapt to changing market conditions.