Quotidian Investments Monthly Commentary – February 2015
In other words, it was largely thanks to China that Apple reported the largest profit in its history. The most important thing to take from that statistic is that this past quarter marked the first time ever that Apple has risen to the number 1 spot in China’s smartphone market. I can’t overemphasize just how important it is to be number 1 in China.
For years Apple has failed to reach that position and at one point it had dropped down to sixth place for market share – behind Huawei, Lenovo, Samsung, Xiaomi and Yulong. The simple reason was that the Chinese wanted larger screens and with the latest iteration of the i-phone they now have exactly that.
It turned out to be the one spark that has caused sales in China to mushroom upwards and take profit figures with them.
It will also be the key to unlocking even bigger sales in the coming quarters. With an estimated 1.2 billion mobile phones in China, Apple has to date barely scratched the surface of the Chinese smartphone market.
In wider economic news, at a meeting of finance ministers and central bankers from the Group of 20 nations they essentially endorsed the use of currency depreciation as a tool to spark economic growth. That decision will no doubt create more market volatility similar to what we saw after the Swiss National Bank’s actions last month.
On a positive theme, the latest US employment and payrolls report was released on 6th February and was indeed a positive surprise. It showed that the number of new non-farm jobs created in the previous month was a higher than expected figure of 257,000 and that the US unemployment rate continues to fall.
Even better news for US consumers, though, was hidden in the detail of the report and this was the marked increase in take-home pay for the average American. Higher take-home pay equals higher discretionary income which, in turn, equals strong consumer spending thus keeping the US economy on an upward trajectory.
These statistics were mirrored in the UK when exactly the same message emerged from employment and income data released here on 18th February.
On the geo-political front markets have been buoyed in the short-term by the relatively good news from Ukraine/Russia but I believe that the new cease-fire agreement is likely to only be temporary (just like the previous one agreed in Minsk last September).
Mr. Putin constantly shifts between diplomatic and military options depending on which he believes will give Russia the greatest tactical advantage at any given time. He is running rings around the Western leaders; whilst he’s been content to use diplomacy, he has never once taken the military option off the table. The latest Ukrainian cease-fire is little more than one more tactical victory in a well-planned, protracted chess match against the West. We have yet to see the end game.
The FTSE reached its highest level for 15 years on 17th February when it closed at 6989.13. Its all-time record closing point of 6930.2 was achieved on the last working day of 1999 and it is a salutary fact that it has taken so long to re-attain this peak.
This puts into clear focus the travails that have adversely affected global stockmarkets generally and the UK market in particular for much of this century to date. The bursting of the dot-com bubble followed by the long and harrowing global financial depression took a severe toll on equity markets. Economic indicators, led by the USA, suggest that a viable recovery is under way. Needless to say, it will not be one-way traffic and market volatility will continue to create short-term concerns.
At 28th February the FTSE 100 closed at +5.80% for this year to date. By comparison the Quotidian Fund finished February at +12.35% for 2015 to date.