Weekly Market Update – Week Ending 28/04/2023

This week, investors have been busy digesting a deluge of company data as earnings season is in full swing. Broadly, results have continued to beat analyst expectations with consumers (particularly in the US) seemingly able and willing to stomach the general increase in prices.

Having seen a gain of roughly 20% year-to-date prior to the results, Microsoft investors were reassured as the company significantly beat expectations with overall revenue growth of 7% for the quarter. The software maker forecast continued strength in sales of cloud-computing services, and it also announced that generative artificial intelligence technology (through its investment in ChatGPT) is already contributing to that growth. The shares were stronger as a result of the news and closed the day some 7% higher.

In the UK, Unilever (owner of brands including Dove, Magnum, and Comfort) saw broad-based growth across its sectors and geographies as it reported its Q1 figures on Thursday. Revenue increased 7% on the same period last year, and the company lifted guidance for the year ahead. Prices increased an average of 10.7%, but interestingly, volumes only fell 0.2%, illustrating consumers’ ability to pay higher prices for the branded products they desire rather than switch to supermarket own-brand versions. Given the results, you wouldn’t bet against the company continuing its enviable record of increasing its dividend each year since 1995.

For these mature mega-caps, some investors caution about their ability to keep growing at similar rates in the future, often sighting the German proverb that “trees don’t grow to the sky.” Whilst there is certainly some truth in that argument, these latest results continue to demonstrate they deserve the title of the redwoods of the corporate world.

John Naylor, Chartered FCSI – Head of Investment Committee