April just ended – what a month for investors. Instability and change in the investment markets were the themes for this past month.
The biggest April investment stories for us at BAI Capital:
The fallout from the war in Ukraine, ballooning inflation & fed rate, Florida – the go-to for international investors, stock market dips & tumbles, & finally, Elon Musk buys his mouthpiece Twitter.
Let’s take a little look behind to better prepare for what’s ahead!
The fallout from War in Ukraine
Global escalation is feared after oil pipelines backed up
Russia shocked the European community by halting gas supplies to Poland and Bulgaria on Wednesday because they had refused to pay for the gas in Russian rubles, as Moscow demanded.
The move comes as tensions remain high between Western allies and Russia after Foreign Minister Sergey Lavrov on Monday said the threat of a nuclear war is very significant and the risks should not be underestimated.
Russia’s economic sanctions & restructuring
Western NATO-based countries are imposing sanctions against Russian businesses and individuals to undermine the momentum of the war. This is resulting in a rapid and turbulent restructuring of Russian capital into other more secure domestic & international markets. Top-level players privy to these activities will be sure to act accordingly.
Ballooning Inflation & Fed Rate, Supply Chain Woes
Supply chain disruptions domino effect
China’s stringent rules to curb Covid-19 are about to unleash another wave of summer chaos on supply chains between Asia, the U.S., and Europe.
Beijing’s zero-tolerance approach amid an escalating virus outbreak brings the pandemic full circle, more than two years after its emergence in Wuhan upended the global economy. Shipping congestion at Chinese ports, combined with Russia’s war in Ukraine, risks a one-two punch that threatens to derail the recovery, already buffeted by inflation pressures and headwinds to growth.
Mortgage rates rising
Mortgage rates continued to rise this past week, reaching their highest level in more than a decade.
The 30-year fixed-rate mortgage averaged 5.11% in the week ending April 21, up from 5% the week before, according to Freddie Mac. It is the seventh consecutive week of increases and is significantly higher than the 2.97% average this time last year.
The last time rates reached this level was in April 2010 when they hit 5.21%, according to Freddie Mac.
Inflation effects on economic recovery
The Consumer Price Index grew at an 8.5% annual rate, the worst rate since December 1981.
A recent Gallup Poll found that 83% of Americans worry a “great deal” (59%) or a “fair amount” (24%) about inflation, while 87% worry “a great deal” (58%) or a “fair amount” (29%) about the economy in general.
Florida – the Go-To for International Investors
The outlier in US property investments
Higher fed rates & rising inflation equals adjustments to mortgage rates. This can affect the housing market negatively by reducing buyer demand; this is starting to be seen in several US markets.
Florida holds a unique position in that, at least in certain strategic regions, demand continues to far outpace supply, creating an ideal environment for investors in 2022 and beyond.
Feel free to browse our blog for the many posts on the unique Florida investment climate, or search BAI Capital in your email search to find our archived emails.
Stability in turbulent times
As investors, we look to put our eggs in the baskets that work for us.
Some of us choose more risk and more gain, and some more steady but sure returns. And most of us hold an array of options, to achieve an ideal mix of risk vs returns.
Florida real estate investments in supply-constrained growth markets can offer stability in returns in these turbulent times.
Ample choice of investment types and property locations
Multi-use & rentals offer the investor a distinct investment advantage. Yearly or monthly and daily rental, with leases, renewed yearly reflecting inflation adjustments.
Miami-Dade, Palm Beach County & more… Florida displays a steady migration influx from affluent American and international newcomers, providing more demand than the small but beautiful Sunshine State can provide.
Stock Market Tumbles
Major markets suffer
Frustrated investors got no relief in April as U.S. stock markets fell deeper into the red. The Nasdaq Composite tumbled 13.3% in April, the index’s worst monthly performance since 2008, while the S&P 500 fell 8.8% and ended the month at levels last seen in May 2021.
The sell-off has wrought carnage for some of the largest names in the stock market. The Nasdaq 100, an index of the largest non-financial companies, is in a bear market, down more than 23% from its last all-time high in November 2021.
The current earnings season has been particularly bad for tech companies, though other factors are also at play in the third-worst start to the year in the S&P 500’s history.
Forecast for 2022
Long-term investors may find solace in the second quarter of 2022, which is likely to be a stronger period of economic growth than the first quarter, Ainina says. In the meantime, focus on building a diversified portfolio and buying shares of those companies that have solid balance sheets and can pass along price increases, he advises.
Big Tech Woes
The tech-heavy Nasdaq Composite index crashed by almost 13.3% this month, its worst performance since 2008. This leaves the index almost 3,880 points (-23.9%) below its all-time high of 16,212.23 points on 22 November 2021. This week’s fall took the Nasdaq into a bear market (where a stock market falls 20%+ from a previous high).
Elon Musk buys his mouthpiece Twitter
World’s richest man widens investment holdings
We first covered Tesla, SpaceX, and StarLink owner Elon Musk back in Dec 2020 when he held a massive net worth of $137bn at year-end. Now in April 2022, he is by far the world’s richest person with a current net worth of $257bn.
On April 14, Mr. Musk launched his surprise bid for Twitter shortly after becoming the micro-blogging platform’s largest single shareholder with a stake of 9.2 percent, or 73.5 million shares valued at about $3bn.
After becoming the primary Twitter shareholder, he then put in a $ 44 bn takeover bid that was at first rejected before finally being accepted on Monday, April 26th. This buyout will make Twitter private.
Sweeping changes for social media?
One thing for certain is that we can expect the unexpected from Elon. He truly thinks outside of the box, and has proven time and again that it works – for him.
He has said he wants Twitter to be “maximum fun”, with “open algorithms”.
But what does this buyout mean for investors, and our social world? Although he has tweeted that he is looking for a more open platform, his being the sole owner will create a more centralized infrastructure. Be prepared for Twitter to follow Elon’s vision, whatever it may be.
4 months into 2022 and it’s clear the $$$ landscape is changing. So, how is your outlook?
April 2022, summed up:
- Massive supply chain disruptions;
- Stock market stutters and drops;
- The emerging property market in strategic locations;
- Social media revamped;
- Adjustments to higher costs of living.
Investment information is essential, but how to use it is the key. We present our monthly recaps on current events and trends to help you make the best decisions, for you, your businesses, your family, and your communities.
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