Nvidia has announced earnings surpassing Wall Street forecasts and has issued guidance for the current quarter that exceeds expectations.
As the artificial intelligence boom continues, Nvidia remains a major beneficiary. Despite a stock price dip, after trading hours, the stock has risen approximately 150% this year. The question remains whether Nvidia can sustain this growth trajectory.
Nvidia said it expects about $32.5 billion in current-quarter revenue, versus $31.7 billion expected by analysts, according to analysis That would be an increase of 80% from a year earlier.
Revenue continues to surge, rising 122% on an annual basis during the quarter, following three straight periods of year-on-year growth in excess of 200%.
Nvidia’s data centre business, which encompasses its AI processors, saw a 154% increase in revenue from the previous year, reaching $26.3 billion and representing 88% of the company’s total sales.
However, not all these sales were from AI chips. Nvidia reported that its networking products contributed $3.7 billion in revenue.
The company primarily serves a select group of cloud service providers and consumer internet firms, including Microsoft, Alphabet, Meta, and Tesla. Nvidia’s chips, notably the H100 and H200, are integral to the majority of generative AI applications, like OpenAI‘s ChatGPT.
Nvidia also announced a $50 billion stock buyback.
Nvidia shares dropped close to 5% in after-hours pre-market trade (29th August 2024).
The P/E ratio of the market is a common measure of valuation. Currently, the P/E ratio is significantly higher than historical averages, indicating that stocks are priced much higher relative to their earnings.
Rapid price increases without corresponding earnings growth
When stock prices rise rapidly without a corresponding increase in earnings, it often signals overvaluation. This has been observed recently, especially with some of the major tech stocks.
Comparison to historical market tops
The current market valuations are almost as high as they were at the peak in January 2022, which was followed by a significant correction.
Buffet valuation metric
Metrics like the Buffett Indicator (market capitalisation to GDP ratio) and Tobin’s Q (market value of assets divided by replacement cost) also suggest that the market is overvalued.
While these indicators point towards overvaluation, it’s important to note that markets can remain overvalued for extended periods, and other factors like strong earnings growth can sustain high valuations for some time
U.S. stock market could be overvalued by as much as 68%
The U.S. stock market, according to some analysts suggests that the current market appears to be overvalued by around 68%.
By comparison, at the peak of the Dot-com bubble, on 24th March 2000, the market was 89.5% overvalued. When the market bottomed out 2.5 years later, it had dropped around 50% from its previous all-time high and was undervalued by nearly 21%.
The fact that the market currently appears overvalued does not necessarily mean it will correct any time soon. The forces pulling the market toward the long-run equilibrium are relatively weak and allow the market to stay over or undervalued for extended periods of time.
From 1954 to 1970, the market stayed continuously overvalued for over some 15 years, and from 1973 until 1987, it stayed undervalued for about 14 years.
The analysis clearly suggests that U.S. stocks are overvalued – but that doesn’t necessarily mean a downturn any time soon – but it will, in time, adjust.
Job growth in the US last year was weaker than previously believed, according to a statement from the Labor Department on Wednesday 21st August 2024.
This revelation has intensified the ongoing debate regarding the health of the U.S. economy. The department’s updated figures indicate that there were approximately 818,000 fewer jobs added over the 12 months leading up to March than initially estimated.
This preliminary revision suggests a 30% decrease in the total number of jobs created during that period, marking the most significant adjustment since 2009.
The revised data points to an average monthly job increase of about 174,000, a reduction from the previously estimated 240,000.
Downward revisions affected most sectors, including information, media, technology, retail, manufacturing, and the broad category of professional and business services.
Analysis by Oxford Economics noted that this indicates the job growth for the period relied more heavily on government and education/healthcare sectors than previously understood.
Despite the revisions, hiring remained robust, albeit not at levels sufficient to match the growth of the working-age population.
The U.S. Labor Department issues monthly job creation estimates based on employer surveys and regularly updates these figures as more data becomes available, with an annual reset at the beginning of each year.
The report from Wednesday offered a glimpse into this process, incorporating data from county-level unemployment insurance tax records. This year’s revision is notably larger than those of previous years.
The Biden administration has highlighted strong job growth as evidence that its policies have positioned the U.S. as the world’s leading economy post-pandemic.
However, Republicans have used the latest figures to contend that the Democrats have misled the public about the economic situation. The Republican Party took to social media to announce: “BREAKING: 818,000 jobs that the Biden-Harris administration claimed to have ‘created’ do not actually exist.”
Over the past year, the U.S. has consistently reported robust job growth, defying both economists’ expectations and public sentiment. These gains have been particularly surprising given the highest borrowing costs in a generation, which typically hinder economic growth.
The recent revisions have lent weight to the argument that the labour market is less stable than previously thought, as highlighted by the Republican response.
Analysts believe these new figures will reinforce the case for the U.S. Federal Reserve to lower interest rates at its upcoming September 2024 meeting, a move that is widely anticipated to prevent further weakening of the job market.
These revisions have not caused widespread concern
Despite earlier economic anxieties this month, financial markets have largely absorbed the latest data without significant turmoil.
But that doesn’t mean there will be zero fallout – turmoil may follow. The data believed to be correct is incorrect – so, can we believe the data? Are there cracks appearing in the U.S labour market?
This data helped the U.S. economy – but it wasn’t right?
Record numbers of people are leaving New Zealand as unemployment increases, interest rates stay elevated, and economic growth remains weak, according to government statistics.
Statistics New Zealand’s data released on Tuesday 13th August 2024 indicates that 131,200 individuals left New Zealand in the year ending June 2024, tentatively the highest annual figure on record. Approximately one-third of these individuals were bound for Australia.
Although net migration is still high, economists anticipate a decline as fewer foreign nationals show interest in moving to New Zealand due to the weaker economy.
The statistics reveal that 80,174 of those who left were citizens, nearly twice the number that left before the Covid-19 pandemic.
During the pandemic, New Zealanders abroad returned in large numbers, spurred by the government’s response to the crisis.
However, for some, the appeal of the 5.3 million-strong country has waned. Economists note that New Zealanders, vexed by living costs, high interest rates, and limited job prospects, are considering relocation to Australia, the UK, and other countries.
New Zealand’s economy is floundering following the central bank’s 521 basis point increase in cash rates, the most substantial hike since the official cash rate’s inception in 1999.
The economy grew by only 0.2% in the first quarter, unemployment climbed to 4.7% in the second quarter, and inflation continues to be high at 3.3%.
The U.K. economy grew by 0.6% in the second quarter of 2024, the Office for National Statistics said Thursday 15th August 2024, in line with expectations.
The data release follows an expansion of 0.7% in the first quarter of 2024.
Economic growth was flat in June, in line with forecasts.
The UK economy has shown modest yet consistent growth each month this year, marking an exit from a mild ‘technical’ recession. Additionally, GDP remained unchanged in April, influenced by wet weather that impacted retail sales and construction activity.
Growth was led by the services sector, in particular the IT industry, legal services and scientific research.
Jerome Powell on Tuesday 9th July 2024 reportedly expressed concern that holding interest rates too high for too long could jeopardize economic growth. This comment came ahead of the consumer price index reading due this week.
Preparing for a two-day session on Capitol Hill, the central bank chief stated that the economy and labour market continue to be robust, even with some recent slowdown. Powell noted a slight reduction in inflation, affirming that policymakers are determined to reduce it to their target of 2%.
“At the same time, in light of the progress made both in lowering inflation and in cooling the labour market over the past two years, elevated inflation is not the only risk we face,” he reportedly said. “Reducing policy restraint too late or too little could unduly weaken economic activity and employment.”
Sounds to me like he is paving the way for the first interest rate reduction.
The comment ties-in with the upcoming one-year period since the Federal Open Market Committee (FOMC) last increased the benchmark interest rates.
In April 2024, the U.K.’s economic growth came to a standstill, figures released on Wednesday 12th June 2024 indicated, putting a pause on the subdued recovery from the previous year’s recession just weeks before the UK election.
Analysts had anticipated growth a levelling off following a 0.4% expansion in March 2024.
Over a longer period however, the outlook was slightly more positive, with a 0.7% increase in gross domestic product (GDP) in the three months leading up to April 2024.
The construction sector saw a 1.4% decrease, marking its third consecutive decline, and production output fell by 0.9%. However, the U.K.’s dominant service sector witnessed growth, with a 0.2% increase.
The UK had managed modest growth each month in the first quarter of the 2024 as the country emerged from a mild short technical recession.
Forecasts indicate that the UK economy will experience sluggish growth among the largest developed nations in 2025.
The Organisation for Economic Co-operation and Development (OECD) has projected a 1% increase in the UK’s gross domestic product (GDP) for 2025, which lags behind the growth rates of other G7 nations, including Canada, France, Germany, Italy, Japan and the US.
The OECD, a globally recognised think tank, has described the UK’s economic outlook as ‘sluggish‘ for the current year. The organization attributes the lackluster performance to the cumulative effects of consecutive interest rate hikes in the UK.
Additionally, the OECD has cautioned that persistent elements of high inflation and the uncertainty surrounding the Bank of England’s interest rate decisions may deter investment.
The latest forecast for the UK economy predicts a 0.4% growth for this year, a revision downward from the OECD’s earlier estimate of 0.7% growth. Consequently, Germany is the only G7 country projected to have slower growth than the UK this year.
Year on year economic growth predictions for G7 nations from the OECD
Year on year economic growth predictions for G7 nations from the OECD
The International Monetary Fund calculates that Russia’s economy will expand more rapidly than all advanced economies this year.
According to the latest World Economic Outlook released by the IMF, Russia’s economy is projected to expand by 3.2% in 2024.
This growth outpaces the anticipated growth rates for the U.S. at 2.7%, the U.K. at 0.5%, Germany at 0.2%, and France at 0.7%.
G7 growth percentages
Russia at 3.2%
U.S. at 2.7%
France at 0.7%
U.K. at 0.5%
Germany at 0.2%
The forecast may be galling for Western countries that have endeavoured to economically isolate, restrict and punish Russia for its invasion of Ukraine in 2022.
Russia has demonstrated that Western sanctions on its industries have made it more self-sufficient and that private consumption and domestic investment remain resilient.
Oil exports
Oil and commodity exports to nations such as India and China, (two of the largest countries in the world by population) – as well as alleged sanction evasion and high oil prices, have allowed Russia to maintain strong oil export incomes streams.
UK and Europe growth
Outside of Russia, the IMF has revised its forecasts for Europe and the UK, projecting a growth of 0.5% for this year. This positions the UK as the second-lowest performer within the G7 group of advanced economies, trailing behind Germany.
The G7 also includes France, Italy, Japan, Canada and the U.S.
However, UK growth is expected to improve to 1.5% in 2025, placing the UK in the top three best G7 performers, according to the IMF.
The IMF also reported said that interest rates in the UK will remain higher than other advanced nations, close to 4% until 2029.
The governor of the Bank of England, Andrew Bailey has raised concerns over economic growth as he warned again that interest rates will not be cut in the ‘foreseeable future’.
The bank boss said he was concerned over the UK economy’s potential to grow. It comes after the government’s forecaster cut its growth outlook for the UK, due to high inflation, interest rates, energy and food price increases which were exacerbated by the Covid pandemic and Russia’s invasion of Ukraine.
Inflation, which is the rate consumer prices rise at, has dropped sharply in recent months, falling to 4.6% in the year to October largely as a result of lower energy prices.
However, it is still more than double the Bank of England’s 2% target and Mr Bailey warned lowering inflation further would be ‘hard work’.
Interest rates are currently at 5.25%, a 15-year high, which has pushed up borrowing and mortgage costs.
Buying the dip means purchasing an asset, usually a stock, when its price has dropped. The expectation is that the drop is a short-term anomaly, and the asset’s price will soon go back up. It is a strategy that some traders and investors use to take advantage of price fluctuations and profit from market rebounds.
However, buying the dip can also be risky, as there is no guarantee that the price will recover or that the asset is not in a long-term downtrend. Therefore, it is important to do your research, use indicators, and have a risk management plan before buying the dip.
Current market situation and general ‘readout’
The S&P 500 is still ‘buy the dip’ for the next six months,’ some analysts suggest.
In some reports, it is expected that the profit cycle will be positive over the next six months and for data to improve before a consumer-spending led downturn leads to a selloff in U.S. stocks! That’s the ‘general’ readout.
Corporate profit expectations are behind much of that forecast for stocks. Analysts expect profit growth to accelerate over the next two quarters and see the S&P 500 in a range of 4,050 to 4,750. A mild recession in early or middle 2024 should lead to a higher risk premium, pushing the S&P 500 back close to 3,800. This is all conjecture.
Other analysts doubt the earnings uplift potential and anticipate stocks to fall back sooner as PE ratios sit at an already high level.
Take your pick
My view, for what it’s worth, is for stocks to climb for the time being through into the New Year and then to face pullback.
Truth is, no one knows. We can all make educated guesses.
Just watch the markets and be ready for the fall – that is coming for sure!
Many economists stronly believe that India’s stellar economic trajectory alongside strong forecasts for some Southeast Asian countries will be important drivers for future global growth.
The next decade, could see Asia Pacific become the fastest growing region of the world economy. India, Indonesia, the Philippines and Vietnam will most likely be among the world’s fastest growing emerging markets over the next 10 years.
India’s economy grew 7.8% in the June quarter, marking the fastest pace of growth in a year.
The momentum in the Indian economy looks really strong at the moment, economists suggest. Some forecasts expect that India will surpass Japan to become the third largest economy by 2030, with the country’s GDP projected to rise from $3.5 trillion in 2022 to $7.3 trillion by 2030.
As a region, Asia-Pacific’s growth is expected to strengthen from 3.3% last year to 4.2% this year, according to economic projections.
Over the next decade, we expect that about 55% of the total increase in the world’s GDP will come from the Asia-Pacific region.
Where does this leave the U.S. and China?
Still, the U.S. will remain an important driver of the global economy, accounting for some 15% of the world’s growth over the next decade.
China will also still be pivotal in this growth story, contributing to about one-third of the total increase over the same period, analysts suggest. China’s recovery has been weaker than expected and the expected ‘growth momentum’ has wained.
China has been affected by a slew of economic data broadly missing expectations.
As a whole, analysts expect global growth to come in at 2.5% this year and next. But please bear in mind these are forecast and move regularly.
Ashoka Chakra – the Flag of India
The flag of India is a horizontal tricolour of saffron, white and green, with a navy blue wheel called the Ashoka Chakra in the centre. The flag was adopted on 22nd July 1947, after India gained independence from British rule.
It is based on the Swaraj flag, which was designed by Pingali Venkayya and modified by Mahatma Gandhi. The colours and symbols of the flag have different meanings and interpretations.
Saffron represents courage, sacrifice, Hinduism and Buddhism. White represents peace, truth, purity and other religions in India. Green represents faith, fertility, Islam and Sikhism.
The Ashoka Chakra represents the law of dharma, the cycle of life and death, and the ancient Indian emperor Ashoka who spread Buddhism across Asia.
India’s flag is also known as the Tiranga, which means ‘the tricolour’ in Hindi. The flag has a ratio of 2:3 and can only be made of khadi, a hand-spun cloth.
The flag code of India regulates the usage and display of the flag by the government and the public.
There are eight billion people living on Earth today, according to the United Nations (UN).
It’s hard to calculate the number of people in the world accurately, and the UN admits its calculations could be out by a year or two – but it estimated that in November 2022 the eight billion line was crossed.
It is only 11 years since the population hit seven billion, and experts say this huge growth is because of many reasons including better health, nutrition and medicine.
One billion in 1800
The world reached one billion people in around 1800, then it took about another 100 years to get to the second billion – but since the 1950s the popultion growth has sped up dramatically.
Countries in Asia, including India, were responsible for a large amount of population growth over the last ten years.
The increase in population shows more children are being born, surviving adulthood and having children of their own.
People are also living longer because of better medicine and nutrition.
Greater population in India than China
If you saw a picture of every person on the planet every second, it would take 253 years.
Middle-income countries, mostly in Asia, accounted for most of the growth over the past decade, with 700 million more people since 2011.
India has increased by roughly 180 million people, and is set to surpass China as the world’s most populous nation next year for the first time in almost 2,000 years.
Birth rates in China have decreased since 1980 when the country’s one-child policy was introduced, and more women have also been having children later in life to focus on their education and career opportunities.
Sub-Saharan Africa population to grow the fastest in coming years
When it comes comes to which countries are likely to grow more in the future, the UN says that most of the 2.4 billion people to be added before the global population peaks are likely to be born in sub-Saharan Africa. This includes countries like Angola, Botswana, Cameroon and the Central African Republic.
But experts say that the rate of rapid growth is starting to slow down, meaning it will take about 15 years for the population to reach nine billion – which wouldn’t be until the year 2037.
One of the main reasons for this is that people in many parts of the world are having less children. In the 1960s five births per woman was the global average, now it’s nearly half at 2.4 per woman.
The UN is predicting that the global population will rise to around 10.4 billion people in the 2080s and remain at that level until 2100.
Does it matter?
The population growing is seen as a success by the UN because it shows how much public health, nutrition, personal hygiene and medicine has improved – but it can also present challenges.
Population pressure
Having more people on Earth puts more pressure on nature, with people in competition with wildlife for water, food and space, as well as with each other. Also, growing food as fuel creates immense infrastructure pressure.
This could lead to mass migration and conflict in coming decades, experts say, particularly as extreme climate change could make parts of Africa and countries so hot they could be unsuitable for people to live in.
More people means there are less resources to go around, and so governments will also need to think about how the way people and countries use what the world currently has and how this can this should be used.
This also includes how we are using energy and the impact on climate change if big countries with growing populations continue to use fossil fuels.
Although having more people on the planet will impact the environment, in fact it is the increase in producing and using materials which creates dramatic pollution increases that causes more of an impact to our immediate environment.
The UN Secretary General António Guterres said: ‘…it is a reminder of our shared responsibility to care for our planet and a moment to reflect on where we still fall short of our commitments to one another.’
