Trading update : 30 April

Clarity on markets

While markets are looking through the current Middle East conflict to take a more constructive view on long-term growth, Goldman Sachs is warning of a near-term pullback – for investors, that means be prepared to buy the dip. This caution is compounded by a deepening divide within the Federal Reserve over the interest rate outlook, and a high level of equity exposure among active fund managers that has contrarians on high alert. The massive $725 billion AI spending war between the main hyperscalers isn’t helping market jitters. Despite the risks and challenges, consumer spending remains strong – Coca-Cola’s results are a clear case in point.

Prepare to buy the dip

Are you a US stock investor? If so, Goldman Sachs says you should brace for a near-term pullback as positioning becomes increasingly stretched and key institutional buyers flip to sellers. While John Flood, the bank’s partner and head of its Americas equities execution services, expects the S&P 500 Index (VOO-NASQ) to finish the year “significantly higher,” he flagged warning signs of a potential near-term rout in the equity benchmark, according to comments carried by Bloomberg, which he says should be viewed as a buying opportunity.

Striking a hawkish note

Federal Reserve officials left US interest rates unchanged at their April FOMC meeting but revealed a deepening division about the outlook for policy due to the increased uncertainty caused by the conflict in the Middle East. According to Bloomberg, four officials voted against the decision, including three who objected to language in their post-meeting statement that suggested the central bank would eventually resume cutting rates.

Spending spree

The big tech names announced quarterly earnings, with Google (GOOG-NASQ) outshining its rivals in Q1, with faster cloud growth. The big four hyperscalers – Amazon (AMZN-NASQ), Meta (META-NASQ), Microsoft (MSFT-NASQ) and Alphabet – are together expecting to spend 77% more in AI capex than the record $410 billion spent last year. Big Tech plans to invest $725 billion this year, with Meta alone projecting full-year capex of $125 billion to $145 billion, driven by its AI strategy and higher component pricing.

Going long

Active funds in the US are nearly fully invested in the stock market, according to a reading from the National Association of Active Investment Managers (NAAIM) exposure index, which climbed to 94 – its highest level since early January, and well above its Q1 average of 82, reports Bloomberg. Steve Sosnick, chief strategist at Interactive Brokers, confirmed that “everybody is long”, adding that the “really high” level of equity exposure is a reason for caution.

EM trickle

According to data compiled by Bloomberg, investors are drip-feeding funds into emerging markets, with inflows to US-listed emerging market ETFs that invest across developing nations and those that target specific countries totalled $1.67 billion in the week ended April 24, compared with gains of $3.29 billion in the previous week. Inflows have totalled $42.4 billion so far this year.

China consumption

China pulled back on fiscal spending in March as the economy rebounded at the start of the year, despite disruptions caused by the war in Iran. The country also launched a nationwide cultural and tourism consumption campaign from late April, where authorities plan 13,700 related events and distribute over 284 million yuan ($41.6 million) in consumption vouchers and other subsidies. Bloomberg reports that a new survey-based gauge points to a modest rebound in consumer confidence, though it may prove fragile without sustained policy support. The new index, based on a monthly survey of 1,200 Chinese consumers conducted online by Mintel Group (Shanghai), shows a slightly larger share of respondents who felt very or quite confident their financial situation would improve over the next three months than in 4Q25.

Fuelling relief

National Treasury said the R3 per litre reduction in gasoline levies will continue until June, and temporary relief for diesel will be increased by 93 cents to R3.93 per litre as the government looks to soften the blow to prices at the pump due to record high oil prices.

Tourism

Income derived from the tourist accommodation in South African (excluding restaurant and bar sales and other income) increased by 8.9% y/y in February, following January’s modest 2.7% y/y increase. This was largely on the back of growth in the ‘other’ accommodation segment of the market, which includes lodges, bed-and-breakfast establishments, self-catering establishments and ‘other’ establishments not elsewhere classified, which added 7.1% to the topline reading.

Life goals

Capitec (CPI-JSE) has appointed Deepesh Desai as CEO of Capitec Life from April 9. Desai was previously CEO of FirstRand’s FNB Life unit and will lead the Capitec division that has seen “significant growth and demand” for insurance offerings from South Africanns looking for simple, personalised cover.

Stock focus: Coca-Cola

Coca-Cola (KO-NASQ) delivered a powerhouse Q1, driven by a 10% jump in organic sales and an 18% increase in earnings. While some of this was boosted by timing and favourable currency shifts, the core strength came from a 3% global increase in volume, proving the brand still has massive pull with consumers worldwide. Growth was steady across all regions, notably in South African and China, suggesting a potential rebound in consumer confidence. Despite the strong start, management kept its full-year outlook unchanged, signalling a steady approach for the rest of the year.