9 Red Cards
4 Customs Street: 4 Jul 2022
Good Morning 😃
How are you doing?
Welcome to this week’s edition of 4 Customs Street, our weekly newsletter on the stock market.
The newsletter is divided into two:
Green White Green—focused on the Nigerian stock market.
Star-Spangled Banner—focused on the US stock market.
Green White Green
The first half of the year was an extremely positive one for the Nigerian stock market. The NGX All-Share Index gained 21.3% in H1 2022.
A common question flying around is why the stock market is doing so well despite all that is happening. A simple explanation is that the difficulties won't become visible until companies submit their financial statements (which will filter in later this month).
Treasury bills and bonds are also offering low returns at the moment, and have made investors explore other options including the stock market.
Last week, the stock exchange suspended nine companies from trading because they failed to submit their audited full-year results 90 days after they were due.
The companies include African Alliance Insurance, Niger Insurance Plc, Royal Exchange, Ekocorp Plc, C&I Leasing. Others are Mutual Benefits Assurance Plc, Coronation Insurance Plc, Premier Paints Plc, and Ardova Plc.
Star-Spangled Banner
The first six months of the year have been the worst performing for the US stock market since 1970. The S&P 500 (which measures the average performance of the biggest 500 companies in the US) fell by 20.6%.
The poor performance is due to a couple of factors (for regular readers of this newsletter, you would be familiar with them):
Inflation is still climbing. May 2022 inflation came in at 8.6%.
If you are in Nigeria or Ghana, this might seem low as recent inflation numbers for Nigeria and Ghana are 17.71% and 27.6% respectively. For the US and the rest of Europe, those are extremely high numbers.
Literally, every country in the world is dealing with record-high inflation.
One of the ways to counter this is by increasing interest rates, which makes borrowing more expensive and draws investors from stocks to fixed income.
The ongoing war between Russia and Ukraine is also adding pressure. The war has kept crude oil prices quite expensive.
Lastly, China is still struggling with Covid-19 lockdowns. China is a key market for many US companies (e.g. Apple and Nike) and buys lots of commodities such as crude oil, soybean, wheat and precious metals.
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