Weekly Research Briefing: April Showers

April 23, 2024

Will this month's rain bring May flowers? We will find out over the next two weeks as 2/3'rds of the S&P 500 will be reporting their earnings and outlooks. Without any relief from interest rates, inflation and the global political situation, it is going to take a stellar set of numbers from the market leading companies to return the indexes to their March highs. Last week saw two major semiconductor leaders (Taiwan Semi & ASML) post less than expected growth causing a quick retreat in one of the markets top sectors which cascaded through the rest of the Nasdaq. Now let's see what the rest of the largest companies in the stock market have in store.

Last week also saw a jump in Treasury yields as strong economic data and less dovish Fed speak lowered expectations for 2024 Fed Fund interest rate cuts. It is important for risk-free yields to find a trading range here and quit leaping higher. This is a big week of hard data (new home sales, durable goods & Q1 GDP) as well as the big March PCE data point on Friday. The bulls are crossing their hooves for any numbers with a 0.2% handle, the lower the better.

The move in the equity markets has been interesting. Oversold pullbacks in the Mag-7, Nasdaq, and the momentum indexes. Meanwhile, much better performance in value and international stocks. Is the market trying to broaden out from its top performers? It sure seems like it. This is what we should have expected from a strengthening economy and rising earnings growth. Credit spreads have widened this month, but they are still at levels lower than most all of 2022-2023 indicating few fears about a collapse in corporate and consumer finances. Maybe April's volatility is just a sign that the winners and losers in the equity markets are changing right now. Nothing wrong with that. Time for the other 493 stocks to leave the on-deck circle and move to the batter's box. Have a great week.

$950 billion in market cap erased from seven stocks last week...

The Daily Shot

UBS decides to slide its stack of chip over onto the 493 line...

@carlquintanilla: UBS: “.. Investors attribute the run in mega cap stocks to animal spirits and the impact of AI; however, our work indicates that surging earnings momentum .. fueled this upside. Unfortunately, this momentum is collapsing, with Big 6 EPS growth expected to decline from 42% to 16% over the next year ..” [Golub]

Time for value investors to take over the market?

Financial stocks have been on a 10-month run of outperformance.

The Daily Shot

And here comes the equal weighted index...

@LizAnnSonders: Last Friday was best day for equal-weighted S&P 500 relative to cap-weighted S&P 500 since March 2021

Few market pros have seen more additions and deletions than Walter, so he has studied a large sample size...

One down month after five up months is not the end of the world...

@edclissold: Market coming off an all-time heater. $SPX surged 25% in 5M for 7th time since WWII. Previous dates should sound familiar for end of major bears (2/75, 11/82, 7/09, 8/20). 3/86 is an exception. Fed cut 11 times from 11/84-8/86. Note '86 case had worst 6m returns. @NDR_Research

Stocks are going to need to grow earnings now if they are to compete with the risk-free rate...

@lisaabramowicz1: Yields on 10-year Treasuries have been above the S&P 500 earnings yield for three straight weeks. This is the first time we're seeing this since 2002: JonesTrading's Michael O'Rourke

But even with higher Treasury yields, credit spreads have remained very tight...

The Spead Site

Our first look at Q1 GDP hits this week. It should be a strong one...

Atlanta Fed

The widely followed Philly Fed indexes are breaking out...

@philadelphiafed: Manufacturing activity in the region continued to expand this month, according to the firms responding to the April Manufacturing Business Outlook Survey. https://bit.ly/3Q9plrj

After 18 months of white-collar shrinkage, the job drought in finance and tech is over...

The best way to gauge this is by looking at the Bureau of Labor Statistics’ monthly Job Openings and Labor Turnover Survey, and focusing on the professional and business services category that encompasses roles such as corporate managers, accountants, lawyers and technical workers. The hiring rate here, which looks at how many people found jobs in a given month compared with the number employed in that industry, stabilized in the back half of 2023 from a year earlier after significant declines in late 2022 and early 2023. It’s now recovered to be slightly positive on a year-over-year basis. You see the same pattern in the finance and insurance group.


NYC looks to be ground zero for white collar job creation…

@carlquintanilla: BMO: “.. . New York City office is one of the few REIT subsectors seeing improved demand. $SLG continues to exhibit strong leasing momentum .. We see positive leading indicators for #NYC office including higher utilization, and increasing market share for relocating tech workers and college grads.”

Richmond Fed’s Thomas Barkin comments on housing prices hitting the CPI numbers...

...Barkin also highlighted elevated shelter prices for more recent hotter-than-expected inflation readings. While the Fed’s preferred inflation gauge is back to 3% overall, shelter costs as measured by Owners’ Equivalent Rent (OER), are still up nearly 6% year-over-year. That’s well above the 3.2% pace that we saw on the eve of the pandemic.

“I’m open to housing coming down and there are folks who’ve done models that suggest that with new rents coming down the way they have, we’re just minutes away from shelter inflation coming down as well, and that would be great,” he said.


Cleveland Fed suggests that minutes away might be seconds away...

@LizAnnSonders: Looking at Cleveland Fed's New Tenant Repeat Rent Index (blue), looks like rent growth has eased considerably ... yet owners' equivalent rent (OER) in CPI (orange) is still moving higher by 5.9% year/year

Blackstone's inflation read is bullish...

@knowledge_vital: $BX - From the Blackstone earnings call - "“In terms of inflation, despite the recent U.S. CPI readings, we're seeing decelerating wage growth and minimal input cost increases across many of our companies. In real estate, we see shelter costs moderating, contrary to government data"

And used car prices continue to collapse...

@KevRGordon: Thru April, @ManheimAuto Used Vehicle Value Index has now fallen by 22.7% from its all-time high ... by far the worst drawdown in the index's history #deflation

The last two times that earnings growth accelerated from a negative rate; stocks went on big runs...

@TimmerFidelity: For equities, the lack (or delay) of a meaningful Fed pivot comes at a time when earnings are starting to do more of the heavy lifting. This is good, and a welcome change from a year ago when earnings were still falling and the market needed relief from lower rates to justify its 40% P/E-expansion.

Valuation is all about the present value of future cashflows, with earnings in the numerator and the cost of capital in the denominator. When earnings are weak, changes in the denominator pack a bigger punch, and vice versa. That’s especially the case when the discount rate has a low starting point, as it did in 2022. Convexity is not just for bond geeks!

Two-thirds of the S&P 500 reports this week and next...

BofA Global

So many mega-caps reporting this week...

@eWhispers: #earnings for the week of April 22, 2024

Semiconductor companies had all the momentum last quarter...

Taiwan Semi showed us that the AI momentum is not going to be a smooth, straight line higher.

"Looking at the full year 2024, macroeconomic and geopolitical uncertainty persists, potentially further weighing on consumer sentiment and end-market demand. We thus expect the overall semiconductor market, excluding memory, to experience a more mild and gradual recovery in 2024. We lowered our forecast for the 2024 overall semiconductor market, excluding memory, to increase by approximately 10% year-over-year, while foundry industry growth is now forecast to be mid- to high-teens percent, both are coming off the steep inventory correction and/or base of 2023." - TSMC CEO C. C. Wei

The Transcript

And ditto for ASML Holdings...

Chip makers aren’t rushing to prepare for the next wave of growth, based on a first-quarter update from lithography giant ASML.

Europe’s most valuable tech company reported orders worth the equivalent of just €3.6 billion, equivalent to $3.8 billion, for the three months through March. That was well below expectations, and was the second-lowest number since 2020...

ASML sells what are probably the world’s most complex and expensive mass-produced machines to chip makers such as Intel, TSMC and Samsung. These companies' equipment orders are a bellwether for the industry’s confidence.

That said, orders of such large, pricey gear can be lumpy. The fourth-quarter number was a record €9.2 billion, so taken together, the last six months have still been strong.


Missed expectations after too much of a good thing also hit the largest logistic real estate company causing its stock to fall like a technology stock...

Continued good news out of the regional bank stocks of credit quality which is a very good sign for the markets...

"Credit quality remained solid. Net charge-offs were $81 million or 29 basis points of average loans, below our target of 30 to 40 basis points for the full year 2024. Delinquencies increased just 2 basis points this quarter and non-performing loans increased 15% but remained low at 60 basis points of period-end loans" - KeyCorp CFO Clark Khayat

"Credit remains strong and net charge-offs move even lower this quarter. Both non-interest income and non-interest expenses were impacted by notable items." - Comerica CEO Curt Farmer

"Well, what I would say on that is the broad credit quality is still very good. So if you look at our C&I book, that’s in really good shape." - Citizens Financial Group CEO Bruce Van Saun

"Credit quality was stable as debt charge-offs improved by 1 basis point from the fourth quarter to 30 basis points. We are sustaining momentum and growth of our primary bank relationships, with consumer and business increasing by 2% and 4% respectively year-over-year." - Huntington Bancshares CEO Stephen Steinour

The Transcript

And a big homebuilder showed that it can navigate in this volatile interest rate environment...

"Although inflation and mortgage interest rates remain elevated, our net sales orders increased 46% for the first quarter and 14% from the prior year quarter as the supply of both new and existing homes at affordable price points is still limited and the demographics supporting housing demand remained favorable. Homebuyer demand during the spring selling season thus far has been good despite continued affordability challenges." - D.R. Horton CEO Paul Romanowski

The Transcript

We are still in the early innings of earnings, but forward revisions moving higher is a very good thing...


Rising earnings will lead to increasing uses of cash. Especially for cash acquisitions...

We expect cash M&A will grow by +15% in 2024. Cash M&A grew by 34% to $384 billion in 2023, the highest level since 2018. Announced M&A among S&P 500 firms in 2024 has remained healthy. $111 billion in previously announced but not yet closed cash M&A among S&P 500 acquirors is expected to close in 2024. However, the cash component of announced M&A has dropped to just 42% of total consideration in 1Q 2024 (vs. 58% in 2023). Because S&P 500 valuations rank in the 84th percentile vs. the past 30 years and interest rates have surged, history suggests firms will increasingly use shares as a form of compensation in transactions.

Goldman Sachs

And when companies go shopping for M&A, they are often looking at private companies...

Apollo Academy

It was another week of busy M&A activity...

  • Int'l Paper (IP - $12b mkt cap - S&P 500 holding) agreed to all-share deal to buy British packaging firm DS Smith (SMDS.uk) in a deal valued at 5.8 billion pounds ($7.22 billion); on closing of the deal, DS Smith shareholders would own ~33.7% of the combined company and IP shareholders will own the rest.
  • Schneider Electric (SND.ger - 116b mkt cap) is in talks about a potential deal with engineering software maker Bentley Systems, in what would be one of the biggest takeovers of a US company by a French corporation.
  • Blackstone said on Saturday it had made a proposal to acquire the UK-listed music rights investment company Hipgnosis (SONG.uk) for $1.24 per share in cash, which would trump Concord Chorus’s offer on Thursday of $1.16.
  • Matterport (MTTR - $540m mkt cap - R2000 holding) to be acquired by Costar (CSGP - $34b mkt cap - S&P 500 holding) at $5.50/shr in $1.6B cash and stock deal. Founded in 2011, Matterport pioneered the development of the first 3D capture solution to deliver dimensionally accurate, photorealistic virtual tours or “digital twins” for any type of property.
  • Wintrust Financial (WTFC - $6b mkt cap - R1000 holding) to acquire Macatawa Bank (MCBC - $500m mkt cap - R2000 holding) in an all-stock transaction as the aggregate purchase price to Macatawa shareholders is currently estimated to be approximately $510.3M, or $14.85 per share.
  • Aramco to buy $1.5 billion stake in China's Hengli Petrochemical.
  • Erik Nordstrom and Pete Nordstrom, the company’s CEO and president, respectively, recently told the department store chain's board they are interested in exploring a deal to take the company private. (JWN - $3b mkt cap - R1000 holding)
  • Blackstone Inc.’s Strategic Partners unit sold a $1.1 billion portfolio of private equity fund interests to Ares Management Corp.

Various news sources and market wires

Even in a down market, it was a good week for two big IPOs...

In a double debut Thursday, digital marketing software firm Ibotta ended its first day as a public company up 17%, while gas and electric infrastructure services company Centuri gained 10%. The listings brought the total raised via IPOs on US exchanges since Jan. 1 to more than $12 billion—triple last year’s pace.

Hammerstone Markets

Goldman Sachs CEO expects much more capital markets activity in 2024...

"Where we stand today, it's clear we're in the early stages of reopening of the capital markets with the first few months of 2024 seen in reinvigoration in new issue market access. For example, there were a number of large IPOs across geographies, and the strong reception across transactions, including the IPO for Galderma, Reddit and Rank is the latest sign that investors' risk appetite is growing. The debt capital market's tighter spreads have contributed to a constructive issuance environment and investment grade with volumes hitting a record for the first 3 months of the year. Additionally, refinancing was a major theme with robust high-yield and institutional loan refinancing volumes. Given a more accommodative issuance backdrop as well as the potential for increased acquisition financing alongside higher M&A activity, we expect solid levels of debt underwriting activity to continue." - Goldman Sachs CEO David Solomon

The Transcript

The heads of Blackstone say that they are accelerating their pace of investing...

In the first quarter, Blackstone more than doubled the amount of investments it made to $25bn from $11bn a year ago. Add in $15bn in pending deals and Stephen Schwarzman and Jonathan Gray’s deal machine is revving into full force.

On an earnings call, they said Blackstone has a number of chunky privatisations in the works and are not waiting for an “all clear” sign to put their roughly $200bn in cash to work.

Gray likened the current opportunity to the years immediately after the financial crisis when Blackstone ploughed billions into PE and commercial real estate bets as the financial fallout of 2008 continued to surface.

Financial Times

I know that I wasn't the only one having flashbacks to the late 1980's after seeing this article...

The long-concealed market value of Tokyo’s largest skyscrapers is being unveiled by activist investors.

In Japan, there’s a huge gap — 22 trillion yen ($143 billion) by one estimate — between how companies value their real estate assets on their books, versus what those same properties would fetch if sold in the current market. That comes from two factors: First, many of the island nation’s firms have held onto properties for decades, each year writing down the cost of fixed assets due to annual depreciation, a common accounting practice. But at the same time, property prices have soared.

The result is that billions in value can be unlocked by pressuring companies to sell off these holdings, a tactic that activist funds are now employing. This was illustrated last week when Japan developer Mitsui Fudosan Co. announced it would aim to sell off 2 trillion yen in real estate assets over the next three years as part of a new business plan — just two months after news that New York-based activist hedge fund Elliott Management Corp. had built a stake in the company.

Elliott’s campaign is partly focused on realizing the value of Mitsui’s properties — including prized skyscrapers across Tokyo — by selling them off, a point the investment firm has discussed with the developer, according to a person familiar with the matter.

It’s a strategy that more activist funds could turn to this year, as they work with Japanese corporations under pressure to change and increase value. Japan is now one of the world’s hottest markets for activist investing, with government agencies and institutions like the Tokyo Stock Exchange asking companies to better manage their balance sheets and focus their business strategies to boost returns for shareholders.


Simply put, if one only buys 6.5 packages of AA or AAA batteries per year, it pays for the Costco membership...

@TSOH_Investing: "The Kirkland Signature battery is probably the most successful private label venture... Duracell said 'We can do what we can on the [Duracell branded] batteries, but how about we make the Kirkland Signature batteries for you, and we make them 40% cheaper?' That's what happened. It's the same battery out of the same plant... There is nothing different, it's just a label." (Peter Malizia, Costco Canada)


I am guessing the yellow Jeep is included...

$97,000 per square foot must be a new record for Texas. Adjust your national housing data figures accordingly.


Learn more about the Hamilton Lane Strategies

Learn more


The author has current equity ownership in: Costco Wholesale Corp.

The information presented here is for informational purposes only, and this document is not to be construed as an offer to sell, or the solicitation of an offer to buy, securities. Some investments are not suitable for all investors, and there can be no assurance that any investment strategy will be successful. The hyperlinks included in this message provide direct access to other Internet resources, including Web sites. While we believe this information to be from reliable sources, Hamilton Lane is not responsible for the accuracy or content of information contained in these sites. Although we make every effort to ensure these links are accurate, up to date and relevant, we cannot take responsibility for pages maintained by external providers. The views expressed by these external providers on their own Web pages or on external sites they link to are not necessarily those of Hamilton Lane.

Recent Content


Weekly Research Briefing: Summer Moves

Moving trucks are getting active in London, Paris and possibly Washington D.C. as political parties on both sides of the Atlantic confront major changes.

Read the Research Article

Weekly Research Briefing: The Halfway Point

Fifty percent of 2024 will be in the books by this weekend. As of now, the S&P 500 is up about 15% which is better than I (and many others) would have guessed six months ago. The economy has been stronger in this first half which has led to a reluctance by the Fed to cut the Fed Funds rate. Inflation has been sticker with core goods falling as expected, but housing has been sticky and insurance prices have been extreme like the weather that is influencing it.

Read the Research Article

Weekly Research Briefing: Cruising into Fed Week

The markets expect little action by the FOMC this week, especially given last week's strong job report. Investors will be sorting through Wednesday's meeting announcement and Fed Chair Powell's press conference, but all eyes are on the horizon for future Fed actions.

Read the Research Article

We use cookies to improve user experience, and analyze web traffic. For those reasons, we may share your site usage with our analytics partners.

Learn More