April saw a general pullback in the markets. Inflation in the US and Canada came in slightly higher than expected which stoked further fears of a higher-for-longer interest rate mandate in the US. However, stretching things out a bit further, the markets have been on a spectacular run since October 28th 2023, so the markets pulling back for a month isn’t the worse thing from a long-term investment perspective.
April Market Performance:
- S&P500: -4.2%
- NASDAQ: -4.5%
- DOW: -4.8%
- TSX: -2.3%
As mentioned above, Canada’s posted inflation reading on April 16th was 2.9%; the expected number was 2.8%. In the US the posted reading on April 10th was 3.5%; the expected number was 3.2%. This contributed to the risk-off sentiment throughout the month and stoked fears of higher for longer interest rates to combat inflation.
The S&P500 was down -4.2% for the month, while the TSX was down -2.3%. The relative outperformance in the Great White North stems from a boost in energy and materials for the month.
As many of you may know, over the last year, the ‘Magnificent 7’ in the US have propelled the S&P500 and NASDAQ. The 7 stocks include: Microsoft, Apple, Nvidia, Alphabet, Amazon, Meta, and Tesla. The 7 stocks were (including their virtues and potential concentration risks) were discussed in the January update. But did you know that Europe has their own group of stocks leading the charge overseas?
The ‘Granolas’ are 11 of Europe’s most valuable stocks. Although the name might evoke the thought of hippies or breakfast cereal, it actually stands for the following names: GSK, Roche, ASML, Nestle, Novartis, Novo Nordisk, L’Oreal, LVMH Moet Hennessy Louise Vuitton, AstraZeneca, SAP, and Sanofi.
While the ‘Mag 7’ consist of growth tech stocks, the ‘Granolas’ stocks offer investors low volatility, strong balance sheets, and consistent dividends. The names are very diversified across different sectors (food, cosmetics, luxury products, healthcare, and tech) and although they are European stocks, they are globally recognized companies. The ‘Granolas’ also tend to trade at a relative discount to the ‘Mag 7’ based on their P/E Ratio, which offers a potential interesting purchase price for investors.
According to Morningstar, from Jan 2021 to Feb 2024, the ‘Granolas’ have performed exceedingly well, and offer less volatility. Over this time frame, an equally weighted portfolio of the companies has a total return of 103%, while an equally weighted portfolio of the ‘Mag 7’ returned 128%. Source: https://www.morningstar.com.au/insights/stocks/246873/magnificent-seven-vs-the-granolas-how-does-europes-version-stack-up
