Trading update : 13 Feb 2025

It’s been another week of head-spinning news for investors. From soggy US earnings and the Magnificent Seven’s eye-popping (over?)valuations to China firing back in the trade war, there’s a lot to unpack. But it’s not all doom and gloom! Shopify is on a spree, Coke sales are fizzing, and European stocks are gearing up for a possible revival.

Soggy earnings weigh on US market

The recent earnings season didn’t quite meet expectations, and Trump’s tariffs are making investors worry more about US stocks. They’re already not doing as well as their European counterparts, and people are starting to question “US exceptionalism”. While some companies reported strong numbers, fewer S&P 500 (VOO-NASQ) stocks are beating profit estimates, and investors are punishing any misses. Company outlooks have also become more muddled, reports Bloomberg, with tariffs now a buzzword in corporate America. A stronger dollar is also weighing on profit from global operations.

Mag 7 red flag

The Magnificent Seven, the darlings of the S&P 500 (VOO-NASQ), are now worth more than the entire stock markets of Japan, Germany, the UK, and India combined, but deliver just a fraction of the earnings. This metric should set alarm bells ringing for even the most exuberant investors. Between them, Alphabet (GOOGL-NASQ), Amazon (AMZN-NASQ), Apple (AAPL-NASQ), Meta (META-NASQ), Microsoft (MSFT-NASQ), Nvidia (NVDA-NASQ) and Tesla (TSLA-NASQ) are worth about $17.5 trillion, more than the $16.4 trillion market value of listed stocks in those four economies, according to Bloomberg calculations. Yet, the combined earnings per share of the Magnificent Seven is about a fifth of the $3,600 from the broad constituents in the other four markets.

Retaliatory shots fired!

China has hit back with tariffs on US goods worth about $14 billion, crushing hopes that we could avoid a trade war between the two biggest economies in the world. Beijing announced the tariffs in response to a US decision to impose an additional 10% levy on Chinese products, which US President Donald Trump called an “opening salvo” in a renewed trade offensive against China. The Financial Times reports that China’s measures target US exports of liquefied natural gas, coal, crude oil, farm equipment and some automotive goods, with levies of 10-15%, in contrast to the blanket US tariffs.

Cracks in US economy

US inflation isn’t slowing down, with core inflation hitting 3% in January. The economy also added fewer jobs, and the unemployment rate is now at 4%. However, the labour market is seen as “largely stable and healthy” with no reason for the Fed to think about further rate cuts in the short term.

China chokes EV market

Falling sales in China and cheaper Chinese competition have hit EV manufacturers hard, especially Tesla (TSLA-NASQ), which is down about 32% from its December highs. While Tesla bulls continue to bet on autonomy and energy storage to drive company growth, competition in the EV market is making it harder for sell cars, especially as makers like BYD now offer its God’s Eye self-driving technology for free, even at an entry level.

Seven and counting

Shopify (SHOP-NASQ) stock rose +3%, after reporting bumper Q4 revenue growth, which was up 31%. This was the e-commerce provider’s seventh consecutive quarter of 25%+ revenue growth.

Sales are fizzing

Coca-Cola (KO-NASQ) – one of Warren Buffet’s favourite stocks – rose +4.7% after reporting 14% sales growth, which is miles ahead of the most other consumer staple stocks. However, US dollar strength means the outlook looks less impressive, with management expecting mid-single digit growth, which is an issue for earnings across S&P 500 companies.

Europe bulls

Goldman Sachs (GS-NASQ) strategists are eyeing growth in European stocks. While they are vulnerable to US trade tariffs, there is potential upside if a peace deal took shape in Ukraine and Germany takes on more pro-growth policies. Bloomberg highlights that a peace deal would increase Russian natural gas supply to Europe, reducing prices by 15-50%, which would “likely raise the valuation of European equities”, said the strategists.

Sappi, Enpower close on biggest SA PPA

Sappi (SAP-JSE) and Enpower Trading reached financial close on South Africa’s biggest power-purchase agreement (PPA). The five-year pact involves buying 175 gigawatt hours a year from SolarAfrica Energy’s R1.8 billion utility-scale SunCentral 1PV plant. The power supplied through the pact will cut Sappi’s scope 1 emissions by 6%.

SA business mood steady

South African business sentiment remained largely unchanged in January, following a surge to a decade-high at the end of last year. The business sentiment gauge edged down to 120 from 121 in December, after averaging 112.6 last year and 109.6 in 2023. The January index was positively impacted by larger import volumes, new vehicle sales, and an increase in tourism activity.

Stock focus: Telkom

Telkom (TKG-JSE) delivered revenue for Q3 25 that was is bang in line with expectations. Earnings before tax was R3 billion. The mobile division was a standout performer, growing revenue by an impressive +9.6% y/y, outperforming Vodacom (VOD-JSE). The outlook for this stock remains positive.

Sector focus: Manganese

Battery-grade manganese is a component in lithium-ion batteries needed for enhancing their safety and longevity. However, Bloomberg reports that rising demand due to the global energy transition and the growing consumer electronics market is projected to outpace supply by 2032. As the top producers of manganese in the world, with the largest reserves and production capacity, South African mining companies will play a pivotal role in meeting this future demand. SA produces 6.2 million tons of manganese per year, according to NS Energy, with South32 (S32-JSE) the world’s largest manganese producer,  and BHP (BHG-JSE) another prolific local manganese miner. Other global resource companies that should benefit from the manganese boom include the Sherwin-Williams Company (SHW-NASQ), Freeport-McMoRan Inc. (FCX-NASQ) and Rio Tinto (RIOL-TRQX).