A lot of pressure on markets after the so called "recession indicator" but there is increasing commentary that it may be false signal (see below), the latest commentary being from a big bond market professional and earlier from Yellen. It makes sense that a yield inversion when rates are at historic very low rates is not necessarily the same signal as when rates were at 6% or higher. I think the US market simply needed a correction and this rate inversion, together with the ongoing trade war between the US and China was a good enough trigger even if it does turn out to be a false signal. I think MWR has so much going for it with organic growth through rapidly growing distribution channels that even if we see a slowing economy Spacetalk sales and profits will grow strongly regardless. I.e. even if same store sales dropped say 10 or 15%, if your distribution channels increase three, four or five fold then a small decline in same store sales will be swamped by the rapid growth in sales outlets that is already occurring. Then there is the argument that wearables, being such a high growth sector, may not even decline in a recession, we may just see a slower rate of growth. Again, assuming we even get a recession any time soon.
Spring is almost here so any effect from seasonal weakness in Australia and NZ is now behind us but download rankings were still looking firm in Australia throughout the winter (top chart below). Improving weather should help going forward and we know Christmas is going to be big again. This time with the UK and increased outlets in NZ. Hopefully another Telco in Australia to come before Christmas as well. Spacetalk app download rankings in Aus are back up near highs and the UK is pushing steadily higher. That's sure to jump further after next weeks big email and flyer campaign to Sky's 10 mill subscribers that have children aged 5-12 years. I don't know which way the markets will go over the next few months but I do know Spacetalk sales will see very strong growth regardless.
https://www.cnbc.com/2019/08/15/mohamed-el-erian-inverted-yield-curve-recession-signal-distorted.html“There are two realities,” the chief economic advisor at Allianz explained on CNBC on Thursday.
The European Central Bank has negative rates and it’s going to take them lower, he predicted. “And it’s going to restart QE,” or quantitative easing, which is an accommodative measure that would involve the ECB buying government bonds from eurozone countries to further boost lending and stoke inflation. “So all that is going to distort our yield curve. And it’s going to weaken the traditional signalling mechanism” for a U.S. recession, El-Erian said.In an interview Wednesday, former Fed Chair Janet Yellen made similar comments regarding the yield curve, saying traders and investors may be wrong this time around to trust it as a recession indicator. “The reason for that is there are a number of factors other than market expectations about the future path of interest rates that are pushing down long-term yields,” Yellen told Fox Business.Yellen also said she does not think the U.S. is headed into a recession. “I think the U.S. economy has enough strength to avoid that, but the odds have clearly risen and they’re higher than I’m frankly comfortable with.”
