After a busy earnings week, stocks finished July with a high note. The S&P 500 was up 9.1% in July, strongest monthly gain since November 2020. Market is in a really volatile period right now. In the past 3 months, SPY is basically flat but the monthly returns are 0.01%, -8.39% and 9.1% for May, June and July respectively. In comparison, The SPY returns were 0.55%, 2.22% and 2.28% for May, June and July in 2021 respectively. This crazy volatility is quite typical for the bear market. In the bull market, prices usually go up pretty slowly and steadily. But when things start to get shaky, the market would go down suddenly. Sometimes the market goes down way too much, it then triggers a mad rebound.
To deal with the volatility, my personal approach is to sit tight on my portfolio. Like many people, I made mistakes during the boom time by taking excessive risks for my portfolio but I have since corrected. I am comfortable with 50% equity exposure in the long run.
The big tech earnings were by and large better than expected based on lowered expectations. Google, Apple, Amazon and Microsoft all had big relief rallies after the earnings. Meta’s earnings was a little bit worse than expected but its stock price has stabilized. One big takeaway from the earnings is that software is really eating the world. Google and Microsoft both have gigantic software businesses with $200B+ annual revenue. Amazon is not just an e-commerce website for our everyday purchases any more. Amazon made most of its revenue from services like AWS and ads. Apple’s iPhone is a big business but its service revenue is 19.6B with 70+% gross margin in the most recent quarter. As big tech’s software businesses further expand, inevitably they are going to battle one another out more brutally on ads, subscriptions and cloud services. As the competition intensifies, hopefully we consumers would be the final winners .