Eek, it’s been a scary week! With global stock markets plummeting on Monday amid fears of a US recession, then a brief uptick on Tuesday, you’re likely asking: what’s going on?

Don’t worry we’re here to help you understand what’s happening and keep you building wealth smartly…

Shining some light on 🔦 

• Global market shocks – what’s happening?

• Pick n Pay’s big win, Temu’s protests & Tesla’s new direction

• Stock update: Higgo’s Top 10 stock picks for 2024

• Earnings calendar: Who’s reporting on revenue, when

• What is free cash flow and why does it matter to investors?

What on Earth is Happening in the Markets?

This week has been turbulent for global stock markets. On Monday, major indices in the US, London, Japan and the Middle East – basically all over the world, including bitcoin – dropped sharply due to fears of a looming US recession.

And local markets weren’t immune. The JSE continued a drop from Friday last week and the Rand fell sharply too. 

Although there was a brief recovery in some markets on Tuesday, the situation remains fluid as we move through the week.

Here’s what you need to know…

Why It's Happening

The primary reason for all this market turmoil is the fear of a US recession. That’s because, historically, a recession in the US often sends ripples through global markets, given its significant influence on the world economy. 

Because the US has seen very high interest rates recently, you have a slowdown in economic growth that leads to less consumer and business spending. This creates a feedback loop that sparks recession fears, and those initial worries often cause sell-offs and can make people and businesses even less likely to spend.

This can cause widespread panic, leading to slumps and sell-offs in the rest of the world – like we saw this last week.

How Countries and Marketplaces Will Respond

The good news is, no one is going to take this lying down.

The US Federal Reserve was looking at cutting interest rates later this year or early next year anyway, so chances are they are going to move that up and slash rates sooner. A move that makes borrowing cheaper and encourages spending, which will have a positive effect on markets again.

It's also important to note that everyone, from companies to fund managers and entire countries, is actively taking steps to protect their investments and stabilise the economy, so this is not a time to get panicky. 

For instance, Warren Buffet's Berkshire Hathaway prepared for exactly this kind of scenario by selling off stocks and building up their free cash flow to $277 billion. (Check out our Wealth Hackers section a bit lower down for an explanation of how this works!).

And you can bet that the major players, from fund managers and companies, are going to be employing tactics to mitigate risks and safeguard investments.

The Long View

While market downturns can be unsettling, it’s crucial to remember that wealth-building is a long-term journey. 

Those who’ve been with us for a while will know, you’re going to see all kinds of ups and downs along the way. The key to building great future wealth is sticking to a well-thought-out plan.

To help you navigate these uncertain times and build wealth smartly, FinMeUp has developed a suite of new tools. These include a financial goal-setting tool, finding your Finimal, and access to financial advisors ready to assist you.

Note: This is not financial advice; it is merely observations. For personalised financial advice, you can book to speak to a financial advisor here (powered by a registered FSP: No. 51310).

HAVE YOUR SAY

STOCKS AND ALL

💸 Huge Win for Pick n Pay: The Pick n Pay Group overshot its rights offer by more than double, raising over R8 billion against a target of R4 billion. This 106% oversubscription underscores strong investor confidence in Pick n Pay's turnaround strategy and growth plans.

🍺 ABInBev's Recovery: Anheuser-Busch InBev reported mixed earnings as it recovers from the Bud Light boycott. It posted revenue of $15.33 billion, slightly below expectations, but saw a 10.2% growth in EBITDA, surpassing forecasts. Despite a decline in US and China sales, global momentum remains strong, driven by consumer demand for its megabrands.

💎 Crypto ETF March: Blackrock's new Ethereum ETF has outpaced Bitcoin ETF inflows, attracting net inflows of $106 million in its first day. At the same time, Morgan Stanley made public plans to offer Bitcoin ETFs to its wealth clients, marking a significant step in the mainstream acceptance of cryptocurrencies.

🌐 Temu's Home Battles: In China, hundreds of merchants have joined protests against Temu because the platform's complex company structure outside of China is making it hard for them to sell effectively cross-border e-commerce, as they vie for clearer, more equitable operational frameworks.

🚗 Tesla's Investor Warning: During Tesla's second-quarter earnings call, Elon Musk advised investors to sell their shares if they don't believe in the company's ability to achieve its AI and autonomous driving goals. Blunt as it seems, Musk's comments reflect Tesla's ambitious transition from an EV manufacturer to a full-blown AI enterprise.

UPCOMING EARNINGS REPORTS

These companies are expected to deliver earnings reports in the next few weeks:

Finding your Finimal

We told you we are building exciting new tools, and one of them is your Finimal…

Your Finimal is linked to your risk profile and is an important guide that helps determine a proper investment asset allocation for your portfolio. 

Your risk profile can change based on your willingness and ability to take risks. For example: You decide to take action on your goal to buy a house or start a family.

Now we are launching Finimals in the next few days, and we’re going to update the button below to take you to where you can find your Finimal…

WEALTH HACKER’S KIT

What is Free Cash Flow?

Since we highlighted Warren Buffet’s move to sell off stocks (which we highlighted a few weeks back) and build up cash reserves, as per today’s main article above, we thought it’s a great time to unpack the practice of free cash flow – and why it matters to you as an investor.

Free cash flow (FCF) is the money a company has left after paying for its regular operations and buying new assets like buildings or equipment. Think of it as the leftover cash that can be used for growth, paying off debts, or rewarding shareholders.

Why is Free Cash Flow Important?

Free cash flow is a key metric for investors because it shows how much actual cash a company generates, which is harder to manipulate than reported profits. For example, a company might show a paper profit but actually lose cash in reality. By looking at FCF, you get a clearer picture of a company's financial health.

How to Calculate Free Cash Flow

To calculate FCF, you subtract capital expenditures (money spent on assets) from operating cash flow (money earned from regular business activities). Here's a simple formula:

FCF = Operating Cash Flow – Capital Expenditures

Uses of Free Cash Flow

Companies can use their free cash flow in several ways:

1. Dividends: Paying cash dividends to shareholders.

2. Share Buybacks: Buying back shares to increase the value of remaining shares.

3. Paying Off Debt: Reducing debt to lower interest expenses and improve financial stability.

4. Reinvesting: Putting money back into the company to fuel growth.

5. Acquisitions: Buying other companies to expand and gain market share.

Why It Matters

Understanding free cash flow helps you see if a company can sustain and grow its business. For instance, Warren Buffett’s Berkshire Hathaway focuses on building up cash reserves, a strategy that relies heavily on understanding and utilising FCF effectively.

THE PEOPLE HAVE SPOKEN

We asked what will most influence SA retail stock performance, and it’s unanimous for economic recovery…

🟩🟩🟩🟩🟩🟩 📊 Economic recovery (100%)

⬜️⬜️⬜️⬜️⬜️⬜️ 🚀 Strategic expansions (0)

⬜️⬜️⬜️⬜️⬜️⬜️ 👔 Leadership and management performance (0)

⬜️⬜️⬜️⬜️⬜️⬜️ ⚔️ Market competition (0)

⬜️⬜️⬜️⬜️⬜️⬜️ 💪 Consumer confidence (0)

Wow, we’ve never had a unanimous poll before, which just goes to show how sorely we’re all impacted by negative narratives and what we see happening in marketplaces.

And it’s exactly in times like these that you need to reinforce your long-term strategy.

So we are glad to tell you we’ve built some awesome tools to help you regroup and refocus on building amazing future success…

THE UPDATE

Over the next couple of weeks, we will make features live allowing you to actively invest towards your goal(s). From travelling the world, building an emergency fund or buying your first property.

Track your goals as you achieve them.