The S&P/ASX 200 (ASX: XJO) delivered a gain across the five trading days while all three US benchmarks also pushed higher.
As always, here are my three key investor takeaways from the week.
Stock selection matters
If it wasn’t evident before then it should be today: stock selection truly matters in the current market environment.
In the last few weeks alone we have seen some of the largest and most powerful companies in the world drop significantly on what can only be considered strong earnings results.
First it was Netflix (NASDAQ: NFLX), then Spotify (NYSE: SPOT) and finally Facebook (NASDAQ: FB), all of which fell by as much as 20% due to weaker than expected outlook statements.
In this environment what you don’t own will be as important as what you do own.
Passing on inflation
Pricing power and ‘quality’ are the in-vogue characteristics when it comes to fund managers at the moment, as they seek to fund businesses that can pass cost inflation onto their clients.
The unknown answer though is how elastic their demand actually is. Consider Ansell Ltd (ASX: ANN), which reported a 13% increase in revenue, but just 2% growth in sales volumes, despite the pandemic entering a third year.
Central bankers know best
The headlines about central bankers being behind the curve or acting too late are coming thick and fast, hence the comments of the Reserve Bank Governor during the week were timely.
He highlighted both the strengths and weaknesses within the economy, the fact that the key policy that was central to credit growth had been reversed, and that there was no pressing need to stop supporting the economy.
Most of all, he shifted the blame for the residential property price bubble from low interest rates to the fact that there is, and remains, a massive shortage of property that people want to live in.