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The Dogecoin (CRYPTO: DOGE) price is up another 4% over the past 24 hours.

One Dogecoin is currently worth 6.9 US cents.

That brings the weekly gains for the meme token, which has a Shibu Inu as its mascot, to 14%. And it lifts the market cap of the world’s number 10 token to US$9.2 billion.

The Bitcoin (CRYPTO: BTC) price has also been trending steadily higher.

The world’s top and original crypto is up 6% since this time yesterday.

One Bitcoin is currently worth US$23,324. That puts Bitcoin up 20% over the past week.

So, what’s driving the Bitcoin and Dogecoin prices higher?

Bitcoin and Dogecoin price join risk asset rally

Part of the strength for the two cryptos, and indeed most altcoins over the past week, has been driven by a broader recovery in investors’ risk appetite.

The tech-heavy NASDAQ, for example, gained 3% yesterday (overnight Aussie time). The NASDAQ is now up 5% over the past week.

In 2022’s new era of high inflation and rising interest rates, the Bitcoin and Dogecoin prices have tended to be closely aligned with other risk assets.

Eyeing the eventual end to the US Federal Reserve’s current tightening cycle and the impact on cryptos, CEO of One River Asset Management Eric Peters said (courtesy of Bloomberg):

We’ll have a powerful up move after that. So we’re in that zone; this is the accumulation zone. You’re in that period of time where you’re not supposed to be selling, you’re supposed to be buying.

Dogecoin investors using the Robinhood trading platform appear to have gotten that accumulation message.

According to U.Today – citing data from crypto tracking service DogeWhaleAlert – 3.2 billion Dogecoin, worth some US$220 million at the current price, was moved by Robinhood to cold storage.

Investors tend to move their digital tokens to cold storage when they’re planning on holding onto them for a longer period of time.

The post Here’s why the Bitcoin and Dogecoin prices are rocketing appeared first on The Motley Fool Australia.

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More reading

• These are the stocks making hay from the Bitcoin price upturn
• Shiba Inu, Dogecoin, Solana surge higher: Where are meme coins headed from here?
• Why Bitcoin, Ethereum, and Cardano are rocketing higher today
• Will Bitcoin hit $100,000 in 2024?
• 5 warnings from the ATO for crypto investors

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin. The Motley Fool Australia has positions in and has recommended Bitcoin. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Neometals Ltd (ASX: NMT) share price is pushing higher on Wednesday.

At the time of writing, the share is trading 4.17% in the green at $1.00 apiece on no market-sensitive news. Earlier in the day, the share price hit an intraday high of $1.035.

In broader market moves, the S&P/ASX 300 Metals and Mining Index (ASX: XMM) is also trading almost 3% higher today.

What’s up with the Neometals share price?

Two recent updates may be inflecting positively on the company’s share price lately.

Firstly, the company noted that it could become a low-cost producer of the chemical element, vanadium.

Following a feasibility study at its Vanadium Recovery Project, estimates found the company could produce around 19 million pounds of vanadium each year at a net cost of US$4.38 a pound.

The project is seeking to recover vanadium from slag, a by-product of the steel-making process. Neo is working to obtain a 50:50 stake in a joint venture with a Scandanavian company.

Neometals then provided a second update. The company outlined reasons for the delay in completing the engineering and cost study (ECS) of its Primobius GmbH joint venture (JV).

It says the ECS will be delivered in two parts, an individual shredding plant and a hydrometallurgical refining plant. They are due for completion in July and Q4 FY23 respectively.

Delays are understood to be from the venture’s focus on its Hilchenbach Spoke operation and fulfilling other agreements, TMF reported last week.

In the last 12 months, the Neometals share price has climbed 107% into the green.

The post Why is the Neometals share price up 5% today? appeared first on The Motley Fool Australia.

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More reading

• Neometals share price higher on lithium battery recycling update
• Neometals share price soars on ‘compelling’ vanadium recycling results

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Dusk Group Ltd (ASX: DSK) share is blowing away the broader ASX market today.

This comes after the company released a trading update for the FY22 period.

At the time of writing, the specialty retailer’s shares are up 9.35% at $2.34, after reaching a two-month high of $2.36 earlier in trade.

In contrast, the All Ordinaries Index (ASX: XAO) is 1.91% higher following a positive lead on Wall Street overnight.

Dusk shares rebound amid soft FY22 result

Investors are driving the Dusk share price higher despite the company’s weakened FY22 performance.

According to its release, Dusk delivered the results on the unaudited accounts of the 53 weeks ending 3 July 2022.

The challenging environment associated with COVID-19 led to government-mandated store closures in the first half of FY22. This saw a reduced number of store trading days by approximately 24%, or 5,483 trading days lost.

As such, Dusk expects sales figures to be at approximately $138.3 million. That compares to $148.6 million in FY21, down 6.9%.

Total like-for-like (LFL) sales is forecast to go down by 10.5%, cycling from the 32.7% surge in FY21.

However, the company projects online sales to grow by 2.9%, adding to the 27% increase in the prior comparable year.

In addition, pro forma EBIT is set to range between $26.3 million to $26.8 million against the $38.4 million achieved in FY21.

Dusk predicts net cash to be around $21.3 million at period end, with inventory of $15.4 million.

The company now has 132 stores (including an online store) after opening 10 new stores throughout the year.

Dusk CEO and managing director Peter King touched on the company’s outlook, saying:

Dusk’s vertical retail model and long-term supply partnerships has ensured our inventory levels have remained well balanced to meet demand.

As we commence FY23, we are comfortable with the quality and quantity of our inventory position. Our Christmas orders have been placed and we do not expect any material impediment to inventory inflows ahead of our key trading period.

We have completed negotiations to open a further five stores in Australia before Christmas and three stores will open in New Zealand during September and October.

Dusk share price snapshot

After hitting a 52-week low of $1.55 on 15 June, the Dusk share price has rebounded strongly by about 50%.

However, when looking at year to date, the company’s shares are down 26%.

Dusk commands a market capitalisation of roughly $133.25 million.

The post Dusk share price storms higher following FY22 trading update appeared first on The Motley Fool Australia.

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More reading

• Top ASX dividend shares to buy in July 2022
• Why did investors go dark on the Dusk share price in FY22?
• Why did the Dusk share price flame out 16% in June?
• Sniffing out an opportunity: Why I think the Dusk share price could be a buy

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Dusk Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is on course to record a strong gain. At the time of writing, the benchmark index is up 1.8% to 6,762.7 points.

Four ASX shares that are climbing more than most today are listed below. Here’s why they are racing higher:

Iluka Resources Limited (ASX: ILU)

The Iluka share price is up 8% to $9.30. Investors have been buying this minerals sands producer’s shares following the release of its second quarter update and first half update. For the first half of FY 2022, the company sold 421,000 tonnes of zircon, rutile, and synthetic rutile. While this was lower than the second half of FY 2021, stronger prices meant that revenue still jumped 29% half on half.

JB Hi-Fi Limited (ASX: JBH)

The JB Hi-Fi share price is up 4% to $43.52. This appears to have been driven partly by a bullish broker note out of Citi this morning. According to the note, the broker has upgraded JB Hi-Fi’s shares to a buy rating with a $47.00 price target. This follows the release of a fourth quarter update on Tuesday that was well ahead of the broker’s expectations.

Megaport Ltd (ASX: MP1)

The Megaport share price has jumped 20% to $7.77. Investors have been buying this network-as-a-service provider’s shares following the release of a strong quarterly update. According to the release, Megaport reported a 13% increase in monthly recurring revenue (MRR) to $10.7 million and its first quarterly operating profit of $1 million.

Zip Co Ltd (ASX: ZIP)

The Zip share price has surged 10% higher to 65 cents. This is despite there being no news out of the buy now pay later (BNPL) provider. However, it is worth noting that the tech sector is booming on Wednesday following a strong night of trade on Wall Street’s NASDAQ index. This saw rival BNPL provider Affirm jump 9% during overnight trade.

The post Why Iluka, JB Hi-Fi, Megaport, and Zip shares are racing higher appeared first on The Motley Fool Australia.

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More reading

• 3 ASX tech shares rocketing by over 15% today
• Zip share price jumps 14% ahead of tomorrow’s update
• ASX 200 midday update: Megaport rockets, Allkem’s update, tech shares rally
• Iluka share price leaps 6% on increased mineral sands production
• Megaport share price explodes 38% on June quarter profit

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended MEGAPORT FPO and ZIPCOLTD FPO. The Motley Fool Australia has recommended MEGAPORT FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The S&P/ASX All Technology Index (ASX: XTX) is up 3.64% so far today, but these three ASX tech shares are soaring far higher.

Megaport Ltd (ASX: MP1), Vection Technologies Ltd (ASX: VR1), and SmartPay Holdings Ltd (ASX: SMP) shares are have all risen by more than 15%.

Let’s take a look at why these ASX tech shares are leaping ahead on Wednesday.

Megaport

Megaport shares are up 20% at the time of writing. However, in earlier trade, the company’s share price lifted 38%. Investors bid up the company’s shares following Megaport reporting an EBITDA profit for the first time. Monthly Recurring Revenue jumped 13% on the previous quarter to $10.7 million. This was underpinned by an increase in multi-cloud connections, strong port sales, a rise in customers, and the company’s launch in Mexico. Commenting on the results, CEO Vincent English said:

The underlying Megaport network and business model has strong operating leverage to further increase profit and generate cash as revenue grows.

Vection Technologies

The Vection share price also leapt 20% earlier today despite no news out of the company. At the time of writing, Vection shares are fetching 8.8 cents each, after reaching a high of 9.5 cents a share this morning. It seems the overall strong performance of the technology sector could be boosting the company’s shares today. ASX tech shares are rising today following a strong day on the NASDAQ in the US. The technology-heavy index surged 3.1% in America on Tuesday. Other Australian tech shares surging higher include Life360 Inc (ASX: 360), up 5%, and BrainChip Holdings Ltd (ASX: BRN), lifting 13.64%. Vection helps businesses connect to the digital world via 3D technology, virtual reality, augmented reality, and IoT. In FY22, Vection boosted its total contract value to $19 million, according to a release on 30 June. The company is expecting to report revenue of $17 to $19 million for the financial year.

SmartPay Holdings

Finally, SmartPay Holdings shares are nearly 16% higher today. This follows the company providing a quarterly trading update. Australian total transaction value lifted a mammoth 71% year on year, while consolidated revenue leapt 48%. Smartpay said customer acquisition results are essentially back to the levels seen prior to COVID-19. Commenting further on the result, SmartPay said:

Increasing the investment in marketing and sales has resulted in record months for lead generation and has delivered accelerated customer acquisition in the first quarter of FY23 with over 1,200 new transacting terminals added through to the end of June ‘22.

The post 3 ASX tech shares rocketing by over 15% today appeared first on The Motley Fool Australia.

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More reading

• ASX 200 midday update: Megaport rockets, Allkem’s update, tech shares rally
• Megaport share price explodes 38% on June quarter profit
• What’s in store for the Megaport share price this earnings season?
• 2 ASX shares we just bought that everyone’s underestimating: fund
• ASX 200 midday update: ANZ to buy Suncorp Bank for $5bn, Whitehaven Coal’s update

Motley Fool contributor Monica O’Shea has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended MEGAPORT FPO. The Motley Fool Australia has recommended MEGAPORT FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Bannerman Energy Ltd (ASX: BMN) share price will be on watch when it resumes trading tomorrow.

Following the results of a general meeting on 18 July, shareholders and the company’s board each agreed to a 10-to-1 reverse stock split.

Whilst this won’t have any material impact on shareholder equity, it could have a material impact on the Bannerman share price.

Bannerman share price 10-to-1 consolidation

The company announced the reverse split – also known as a stock consolidation – on Monday after shareholders voted in 98% majority in favour of the move.

A reverse split is an action taken by executives to effectively merge the number of shares outstanding into a proportionally smaller number.

Contrast this to a conventional stock split, whereby the number of shares outstanding is diluted, but for the same desired outcome.

Further, whereas share buybacks only apply to certain shareholders, reverse splits apply equally to all shareholders.

Also with a reverse split, there’s no impact on shareholder equity – they still own the same percentage stake – however, it is likely to increase the share price on market.

Companies do this because they feel the market is under-reflecting the ‘true value’ of their equity. Hence, the reverse split is done to better reflect perceived intrinsic value.

Bannerman affirmed the same in its language around the move, in its proposal last week.

“Bannerman shareholders are believed to hold a positive view towards reducing the Company’s share count,” it noted.

The Consolidation is proposed to reduce Bannerman’s capital structure (share count) to a level that better reflects the advanced stage of its Etango Uranium Project and potentially makes the Company’s shares more attractive to certain investors, including institutional and retail investors in North America.

Filings made to the ASX show that it reduced its share count from 1,487,682,104 before the reverse split, to roughly 148,768,210 shares on issue afterwards. This represents a 90% decrease.

Bannerman also made similar reductions to various stock options and performance rights on issue.

In the last 12 months, the Bannerman share price has held a 38% gain.

The post The Bannerman share price just completed a 10-for-1 reverse stock split. What’s next? appeared first on The Motley Fool Australia.

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More reading

• The ups and downs for ASX uranium shares in the 2022 financial year

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Appen Ltd (ASX: APX) share price is well and truly in the green on Wednesday despite no news having been released by the company. It’s joined in the green by its technology-focused peers.

At the time of writing, the Appen share price is $6.27, 6.45% higher than its previous close.

For context, the broader market is also gaining today. The S&P/ASX 200 Index (ASX: XJO) is currently up 1.8% while the All Ordinaries Index (ASX: XAO) has lifted 1.9%.

Let’s take a closer look at what’s going right for the artificial intelligence data provider.

Appen share price climbs 6% as tech outperforms

The Appen share price is leaping higher today alongside the broader ASX tech sector.

The S&P/ASX 200 Information Technology Index (ASX: XIJ) has surged 3.9% right now, with none of its constituents having slipped into the red.

It’s a similar case for the S&P/ASX All Technology Index (ASX: XTX). The index has gained 3.7% at the time of writing.

ASX tech stocks’ day in the sun follows an almost equally strong session on Wall Street overnight. The tech-heavy NASDAQ Composite rose 3.11% in Tuesday’s session overseas – its best single-session performance in nearly four weeks.

Meanwhile, the ASX 200 tech sector is being bolstered by news of Megaport Ltd (ASX: MP1)’s 10% revenue jump. The ASX 200 tech giant’s stock is currently up nearly 21%.

Though, the market isn’t expecting to hear news of Appen’s earnings until 25 August. No doubt all eyes will be on the stock that day to see if it can correct some of its recent losses.

The Appen share price has plummeted 43% since the start of 2022. It has also dropped half its value over the last 12 months.

The post Why is the Appen share price leaping 6% on Wednesday? appeared first on The Motley Fool Australia.

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More reading

• Why Appen, Arizona Lithium, Australian Stategic Materials, and Nuix shares are dropping
• Why the upcoming first-half result could be pivotal for Appen shares
• Tech tumble: How this ASX share plunged 59% last financial year
• Why did the Appen share price sink 13% in June?
• What on earth happened to ASX 200 tech shares in June?

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Appen Ltd and MEGAPORT FPO. The Motley Fool Australia has recommended MEGAPORT FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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S&P/ASX 200 Index (ASX: XJO) banks broadly benefited from the Reserve Bank of Australia’s first interest rate hike earlier this year.

That 0.25% increase on 3 May brought Australia’s official cash rate up from the all-time low 0.1% to a still historic low 0.35%.

Small, gradual increases in the benchmark interest rate can benefit the ASX 200 banks by enabling them to increase their own lending margins.

Faster and bigger increases from the RBA can hinder the ASX 200 banks’ loan books by decreasing demand for new mortgages and other loans, and increasing the number of bad debts they hold.

Hence, mortgage holders and investors alike took note of the RBA’s 0.5% increase on 7 June followed by another 0.5% increase earlier this month on 5 July, bringing the official cash rate to 1.35%.

The more aggressive tightening has seen the ASX 200 bank shares come under pressure along with much of the broader market.

How high will the RBA hike rates?

The most recent rate hike almost certainly won’t be the last one we see.

In the RBA’s minutes, released yesterday, the central bank said “inflation was expected to increase in year-ended terms through the remainder of 2022″.

As for its expected response, the RBA stated:

The current level of the cash rate is well below the lower range of estimates for the nominal neutral rate. This suggests that further increases in interest rate will be needed to return inflation to the target over time.

Of the ASX 200 banks, Australia and New Zealand Banking Group Ltd (ASX: ANZ) is forecasting the most aggressive tightening from the RBA. ANZ believes the central bank will boost the cash rate by 0.5% in each of the next four months. That would put the benchmark interest rate at 3.35% in November.

Commenting on ANZ’s outlook and the impact on borrowers, RateCity research director Sally Tindall said (quoted by 9 News):

ANZ now believes the cash rate could hit 3.35% by November – that would be a rise of 3.25 percentage points in the space of seven months. With central banks hiking official rates around the world, it’s difficult to see the RBA doing anything less than a double hike in August.

Many families are already under the pump with skyrocketing grocery and petrol costs. Hefty increases to mortgage repayments, on top of this, could tip some into the red.

As for the other ASX 200 banks, Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd (ASX: NAB) are all aligned in the belief the RBA will reach a 2.6% cash rate by November.

How have the ASX 200 banks performed since the rate rises?

May’s rate increase was the first hike by the RBA since November 2010.

So how have the ASX 200 banks performed compared to the benchmark since rates have started rising?

Well, the ASX 200 has lost 7.5% since the opening bell on 3 May.

Over that same time, the CBA share price is down 6.1%; the NAB share price is down 7.5%; the ANZ share price has tumbled 20.6%; and Westpac shares have dropped 14.1%.

The post How high will the RBA hike rates in 2022? Here’s what the ASX 200 banks are forecasting appeared first on The Motley Fool Australia.

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More reading

• ANZ to buy Suncorp’s banking business, and real wages going backwards. Scott Phillips on Sky News First Edition
• Is the NAB share price in danger from a resurgent ANZ?
• Top broker gives its verdict on ANZ’s Suncorp Bank acquisition
• What might ANZ’s Suncorp deal mean for competition among ASX 200 banks?
• This is what analysts are forecasting for the Westpac dividend through to FY24

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Goodman Group (ASX: GMG) share price is rebounding with the market on Wednesday.

In afternoon trade, the integrated industrial property company’s shares are up 3% to $19.14.

However, despite this gain, the Goodman share price remains down 28% since the start of the year.

Is the Goodman share price ready to take off?

According to a recent note out of Goldman Sachs, its analysts believe that now could be the time to pick up shares.

Goldman currently has a buy rating and $25.40 price target on the company’s shares.

Based on the current Goodman share price, this implies potential upside of ~33% for investors over the next 12 months.

Why is Goldman bullish?

In its initiation report, Goldman spoke very positively about Goodman’s outlook. This is due to long term demand for industrial property, its $12.7 billion development pipeline, and its ability to capture market rental growth.

The broker believes this will allow Goodman to deliver asset under management (AUM) growth of 19% through to FY 2024 even as interest rates rise.

Goldman commented:

Our view of GMG is supported by a solid outlook for the Industrial sector more broadly, with a number of favourable fundamentals underpinning future long-term demand for industrial space (e.g., increasing e-commerce penetration and supply chain modernisation).

Given GMG’s preference to own, develop and manage high-quality industrial assets in key infill markets globally, we believe it is well-positioned to capture market rental growth, which when coupled with elevated investment demand for industrial assets will assist in contributing to AUM growth through increasing valuations (against a backdrop of rising rates).

And while the Goodman share price is not conventionally cheap, the broker believes it is trading at an attractive level when factoring in the company’s growth potential.

Its analysts conclude:

Year to date, GMG shares are down ~27%, underperforming the ASX200 by ~22% and the ASX200 REIT index by ~9%. Our EPS estimates sit in line with Visible Alpha consensus in FY22, -0.2% lower in FY23 and -1.1% in FY24. We estimate that GMG currently trades on a P/E to growth ratio of ~1.9x (vs. 5-yr historical average of ~2.7x), noting the current market implied growth rate of ~9% pa, compares to our FY22-24e EPS CAGR of ~13%.

The post Down 28% so far this year, could the Goodman share price be ready to take off? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Magellan Financial Group Ltd (ASX: MFG) share price has spiked 8.69% to $13.63 per share in lunchtime trading on Wednesday.

While there has been no news released by the company today, many investors may still be digesting Magellan’s annual market review, released yesterday.

Meantime, the broader market is also up today, with the benchmark S&P/ASX 200 Index (ASX: XJO) rising 1.72% so far.

What’s news at Magellan?

Yesterday, Magellan released its Magellan InReview 2022, providing insights and commentary on the global investment landscape today.

Magellan Global portfolio managers Nikki Thomas and Arvid Streimann described why and how inflation, income inequality, geopolitics, and climate change will dominate global economies and markets in the next year.

They point out that the efforts underway to resolve these challenges will favour quality companies.

In terms of how to navigate today’s “uncertain and unbalanced world to protect capital”, the pair said they remained focused “on investing in only high-quality companies that can cope with the challenges the world faces”.

They wrote:

We are seeking companies that we expect to be resilient during the tightening of financial conditions and those that can benefit from such conditions. This means companies that are protected from rising and high inflation or indeed can benefit from high prices.

In terms of the portfolio, a world of rising interest rates has prompted us to scale back our holdings of energy utilities that had risen on their bond-proxy allure when rates were low.

We avoid growth (but not cash-generating) companies that are susceptible as valuations are deflated by higher discount rates and we exited those similarly vulnerable due to low cash generation now.

Our concerns about China prompted us to exit Chinese-domiciled stocks.

We added banks that are likely to enjoy higher margins as interest rates return to more normal levels.

We have added high-quality defensive companies with pricing power and minimal commodity and labour-related cost pressures.

A pushback against inequality has driven many policy changes of late in countries from China to the US that act against investment returns.

The risk for equity investors is that any lowering of the corporate profit share of national income will weigh on overall equity returns. Rising social-licence risks contributed to our decision to reduce our holding in Meta Platforms Inc (NASDAQ: META).

The top five holdings in the Magellan Global Fund (ASX: MGOC) as of 30 June are Microsoft Corporation (NASDAQ: MSFT) 7.8%, Visa Inc (NYSE: V) 6%, Alphabet Inc (NASDAQ: GOOGL), (NASDAQ: GOOG) 5.6%, Mastercard Inc (NYSE: MA) 5.1%, and McDonald’s Corp (NYSE: MCD) 4.5%.

Switching focus from rising rates to earnings resilience

Thomas and Streimann comment:

Assuming no more shocks, the dominant driver of equity market returns is likely shifting from interest rates to earnings; in particular, downgrades to earnings expectations. This is a natural sequence when higher rates slow economies.

As a result, the Magellan Global Fund is “holding a cash level moderately higher than usual”.

They add:

We will seek to use this money to buy high-quality companies at great prices as we navigate the volatility induced by the uncertain backdrop.

We remain confident that the portfolio is positioned to benefit from longer-term investment thematics and secular growth tailwinds to above-GDP growth in many segments of industry.

These include digitalisation trends across our lives – in payments, in enterprise processes, in advertising, entertaining and retail spending – as well as the energy transition and electrification and rising usage of data analytics via increased computation speeds.

How are quality companies performing in the bear market?

The pair say earnings estimates for S&P 500 (INDEXSP: .INX) companies have shown resilience in 2022, especially due to the booming energy sector and commodity prices.

But they add:

European earnings could be susceptible to downgrades; Chinese earnings expectations have already been downgraded. We expect more downward pressure on earnings outlooks through the balance of this year as companies review guidance. Broad capitulation of negative earnings revisions is normally a prerequisite for a bottoming in equity markets.

As Streimann explains in the accompanying Q & A: “Quality companies tend to be defensive, which means they provide reliable earning streams. They have low leverage and high returns on capital.”

He added:

Growth-focused quality companies tend to have profits further into the future than most other companies. That means their valuations are more sensitive to higher interest rates, which have gone up significantly this year. While we still consider these quality companies, this mechanical link between interest rate hikes and valuation has dragged down the overall quality index.

What else is happening at Magellan?

Yesterday, Magellan announced the official appointment to the board of its new CEO and managing director David George.

George is replacing Magellan co-founder Hamish Douglass, who will now work as a consultant to provide valuable investment insights, including geopolitical and macroeconomic views.

Douglass is expected to begin in his new role on 1 October after an extended period of personal leave.

The post What market prediction sent the Magellan share price spiking 9% today? appeared first on The Motley Fool Australia.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Motley Fool contributor Bronwyn Allen has positions in Magellan Financial Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet (A shares), Alphabet (C shares), Mastercard, Microsoft, and Visa. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), and Mastercard. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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