The season of the quarterly corporate statements’ publication is coming to its end, and it is high time to sum up the results. The peculiarity of this quarter lies in the fact that it has turned out to be one of the most controversial ones over the past few years. The stock market’s volatility has become one of the highest in recent years. The reason is that many companies have demonstrated the worst results compared to the forecasts. If, during the last few months, the technology sector was setting the trend, then, at the end of this season, it has demonstrated one of the greatest declines, taking down the entire market.
Companies that fell short of investors’ hopes One of the drivers of the Facebook technology market has been reporting declines for two quarters in a row, although in general, the company is reaching the end of the year on a positive trend. Of course, some important role in the company’s shares collapse was played by the scandals involving Mr. Mark Elliot Zuckerberg, who can lose its senior management position in the spring of 2019.
Following Facebook, such companies as Alphabet (Google) and Amazon have also issued pretty weak financial statements. The sales performance of both giants has turned out to be much lower compared to the forecasted values. Analyzing these companies’ financial statements, investors have seen only promises to reconfigure a business-model by focusing more on security matters and data cryptography.
One of the greatest disappointments for investors was the securities of the most valuable company in the world. After Apple disclosed its sales data in the early November, its securities immediately lost in value by 7, having eventually declined by around 16%, which was its minimal value since July.
Taking into account the fact that the securities of this corporation guarantee 12% of NASDAQ index value and 5% of Dow Jones index value, they pulled down the entire stock market. However, analyst point out that this problem has much deeper roots. The major part of the blame lies not on the financial statements, but on the overall macroeconomic situation.
The retail sales sector may serve as an example and as a confirmation of that: the securities of Walmart, Home Depot and Macy’s have appeared under the pressure despite the quarterly sales growth. In particular, Walmart chain store system has expanded its internet-order delivery service and increased the number of retail outlets. Notwithstanding, its securities has lost their value by 6% in the last two weeks. Some part of the losses has been covered by the following oil companies: Chevron and Exxon Mobile. They have managed to gain some profits comparable with the income under the oil price at the level of USD 100 through the growing shale oil production. However, it becomes more and more risky to rely on this sector against the background of the decreasing oil price.
Conclusion: The quarterly statements have exposed some of the structural problems of the corporations, and this fact doesn’t give any optimism with respect to the growth in the next season. Here are some main obstacles:
• Trade wars. The policy of the United States of America towards the European and Asian markets has become a reason for the decline in the demand for the US manufacturers’ products over these regions. As a result, a number of the biggest corporations had no other choice but to revise their sale forecasts for the next quarter downwards.
• Wage and rate growth. This is one of the secondary causes, which affects the production cost growth, decreasing the income.
• Uncertainties. The overall slow-down in economic growth put s pressure on all markets, including commodity and currency markets.
The stock market decreases against the background of the economic activity slow-down in the run-up to the New Year festivities. Switching from aggregated indexes to the individual companies’ shares may be an alternative. While the technology sector is experiencing hard times, the consumer sector is doing quite good. In terms of sustainability of companies and potential dividend payout, it makes sense to focus on the securities of Coca-Cola, Procter & Gamble and McDonald’s.