Weekly Market Update: May 22, 2020
This was an exciting week across the country as we head closer and closer towards the light of a post-quarantine economy and lifestyle. Granted, life after coronavirus will be significantly different than normal (with social distancing and masks becoming part of the new normal) but it’s still a cause for excitement.
Additionally, contact-tracing via Google/Apple products gained steam as Alabama, North Dakota, and South Carolina committed to using the technology.
Let’s take a look at some of the biggest business updates from the week.
Facebook Enters E-Commerce
Facebook announced “Facebook Shops” this week in a move that’s sure to cause a stir for other major players (notably Amazon, EBay, and Shopify). Although Facebook already has a Marketplace feature, Facebook Shops will turn each business page into a digital storefront. There are several reasons why this is a huge announcement:
● Size - Facebook has it. There are about 60 million Facebook business pages that all now have the ability to sell products online. This could mean an entirely different eCommerce landscape in the next few years.
● Timing - This announcement has come 2 months into a business-crushing pandemic. Since many businesses already have a Facebook page, this creates an easy jump into a new way to sell their products.
● 1-2 Punch - There are about 3 billion users scrolling their timelines between Facebook and Instagram (which Facebook owns). Additionally, companies are already spending tons of money advertising on both platforms. Now, Facebook is primed to enter the eCommerce game too on its quest for internet domination.
3 billion people will be scrolling Facebook, see an ad from a business, head to that business’ page, and then buy a product from that business’ shop, All on Facebook.
Softbank Vision Fund Loses $18 billion
If you’ve never heard of the Softbank Vision Fund before, they love investing in early-stage startups. They were a huge contributor to the huge valuations of Uber ($80 billion), WeWork ($47 billion), and Lyft. Big valuations are nice but so is actually earning money.
This week Softbank reported a colossal loss of about $16 billion dollars. Softbank blamed the losses on “deteriorating market conditions” as well as the coronavirus pandemic. You’d have to imagine that the fall of WeWork played a major part in it as well.
On the homefront, Uber also cut about 3,000 more jobs this week and plans to close 45 global offices.
A ray of hope for auto workers
Following the trend of taking baby steps towards reopening the economy, Detroit’s big three automakers announced that they’re potentially opening up again. These factories have been shuttered since mid-March but now thousands of factory workers (about 133,000) should be returning to work.
However, the return of the economy is a little awkward.
1. Workers want to return to work but it also has to make financial sense for business owners.
2. For example, some restaurants will soon be given the green light to go from ‘takeout only’ to ‘open but only at 25% capacity’. In this case, it would make more sense for these restaurants to stay ‘takeout only’. They’d make more money this way because of fewer expenses, fewer workers, no heating/AC bills, etc.).
In the auto industry, workers want to return to work but it will be interesting to see if the demand for automobiles has returned.
What is the Oracle up to?
During times of crisis, people often like to look to leaders for guidance. In the 2008 financial crisis, legendary investor Warren Buffet played a big part in saving the U.S. economy.
During the coronavirus pandemic, the Oracle of Omaha has mostly been...selling...and hanging out.
● Warren’s holding company Berkshire Hathaway has sold almost all of their shares in major airlines, major banks, and a few others.
● In total, Warren sold thousands of shares of 19 different stocks.
● Warren Buffet has just been sitting in an enormous pile of cash throughout the pandemic.
He hasn’t made any moves as far as where he plans to invest next. We’ll keep you posted.
That’s it for this week! Join us next week for another market update.
Securities and investment advisory services offered through NEXT Financial Group Inc. Member FINRA/SIPC. Sierra Ridge Wealth Management and Chris Simpson are not an affiliate of NEXT Financial Group Inc. This material is not intended as an offer or solicitation for the purchase or sale of a security or an other financial instrument. Past performance does not guarantee future performance. All the views expressed are those of Chris Simpson and not those of NEXT Financial Group Inc.
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