It’s hard to fully appreciate the speed at which things are changing today.
A recent report on the life cycle of companies illustrated that in the 20th century the dominant players took 30 to 70 years to grow to peak size and profitability.
These were the likes of Johnson and Johnson, Tesco, McDonald’s, GE, Coca Cola and IBM.
If one looks at companies in the 21st century, the average time span is closer to 15 years.
As an example Amazon, a company that destroyed book and music retailers only a decade ago is having to reinvent itself (neither books or music are major profit drivers now) with massive investment in cloud computer storage and online media.
Investors are questioning whether Alibaba, Apple, Google, Netflix, Rackspace are eating Amazon’s lunch. Even consider Apple, the biggest company in the world, all on the back of the iPhone which came out in ……….. 2008.
Big pharma (Glaxo, Astra), the supermarkets (Tesco, Walmart), clothes’ retailers (M&S, Gap), Telco’s (Vodafone, BT), fast food (McDonald’s, Burger King) and carbonated fizzy drinks (Coke, Pepsi) are all fighting to stay current and relevant.
Consumer tastes are changing so fast that new players can create new products, react quicker to change and are unburdened by the costly infrastructure of their older competitors.
Market mood swings
This speed of change can also be seen in markets over the last four weeks.
Down 10% then straight back up 10% plus, the chart looks like a perfect V.
The markets in early October were looking at some potentially negative scenarios.
- Russia / Ukraine
- Ebola (US cases)
- The end of US QE
- Mid-term US elections
- Collapsing commodity prices
- Tax inversions stopped by US (which scuppered some big M and A deals), bad EU economic data etc
2 weeks later
- Russia makes a deal with Ukraine over gas supplies (which encourages the belief that there will not be a problem with Russian supplies to Europe this winter)
- Ebola cases in the US are contained and sufferers are cured
- The Fed reiterates lower for longer interest rate message
- Quarterly US corporate earnings are generally good
- The U.S. starts talking tough with ISIS
- The collapse in oil which will / is feeding through to lower petrol prices will act like a tax cut for consumers, less spent at the pump will mean more spent at the mall
- The Republicans taking over Senate control means less regulation, possible spending cuts, possible tax cuts, less pressure on big financial companies, the possible building of the Keystone oil pipeline from Canada, the go ahead for US energy producers to export
- Japan steps up its central bank stimulus two days after US QE finishes (Japanese market goes up around 10% in a few days) the message received is that central banks are going to keep pumping out the liquidity, the baton has been passed
- Draghi tells markets there is unanimous agreement in the ECB for greater unconventional stimulus (this means full QE or a German agreed version anyway)
If a week is a long time in politics ………………………………
NOTE: This is written in a personal capacity and reflects the view of the author. It does not necessarily reflect the view of LWM Consultants. The post has been checked and approved to ensure that it is both accurate and not misleading. However, this is a blog and the reader should accept that by its very nature many of the points are subjective and opinions of the author. This is not a recommendation to buy any product or service including any share or fund mentioned. Individuals wishing to buy any product or service as a result of this blog must seek advice or carry out their own research before making any decision, the author will not be held liable for decisions made as a result of this blog (particularly where no advice has been sought). Investors should also note that past performance is not a guide to future performance and investments can fall as well as rise.