Weekly Market Update 21 - 05 - 2022 - Continued Stock market sell off, Tesla dropped from index, Live trading room update

May 21, 2022

Welcome to your Weekly Market Update

What a week it’s been for the financial markets, with major tech stocks still near its lows, Tesla being removed from an index, and oil markets still as volatile as ever. The federal reserve has also made it very clear that their number one goal is to curb inflation, this means only one thing, higher interest rates. Let’s jump into it by looking at the S&P 500.

Chart of S&P 500

The S&P 500 just tested the 3800 mark, which means we are seeing continued selling across major stocks (especially in the tech sector) as fear and caution continues to be seen among large investors. This is unsurprising as the Federal Reserve has said their main focus is to limit the effects of inflations in the market and get the % down. The method in which the central bank has chosen is to increase interest rates aggressively, but what does this mean for stock picking. Well, very simply put stocks that have debt on their balance sheet will be negatively impacted with higher interest rates as you will have to pay more for borrowed capital. However, the stocks that have strong balance sheet, and are cash heavy have seen a much better performance in terms of investor interest. As far as investing goes, this is why its important to keep a diversified portfolio, we make sure to have both Value stocks (established cash rich companies) and Growth stocks (companies that have high research, therefore higher potential) on our books.

Chart Of Tesla 

This week Tesla got taken off the S&P 500 ESG Index (this is a benchmark index used by some firms) resulting in a further drop in price taking the total fall to nearly a 50% drop in price. The reason for Tesla being taken off the index according to multiple sources was in regards with workforce and labour conditions. Multiple sources also state that “Elon Musk is an unconventional manger and is prone to impulse tweeting” which does add further risk to his company. The impact of this will be that Index trackers will be forced to sell Tesla from their holding as it will no longer be part of the index, which has pushed price further from an already injured tech sector. This has sparked of an unsurprising tantrum from the CEO and instigated a debate about ethics in investing.

WTI Future Chart

Lastly let’s have a look at the oil markets this week. WTI continues to battle for price, thoroughly staying above $100 this week and showing signs of going higher has left traders fighting a range between $115 and $100. We have seen a few days of whipsaw movement which lead to a few losses but that is to be expected in any market. Overall, we are still up 2% for the month and are more than happy with the way oil continues to move for now.

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