FintechZoom QQQ Stock: Market Trends and Future Outlook

Overview of Micron Technology

Recent Performance and Stock Decline

Factors Contributing to the Decline

1. Weaker-than-Expected Earnings Reports

2. Oversupply and Falling Prices

3. Global Economic Uncertainty

4. Competitive Pressures

5. Supply Chain Disruptions

6. Negative Analyst Revisions

Financial Metrics

Implications and Future Outlook

Conclusion

This article first appeared in Forum, The Edge Malaysia Weekly .

The notion of environmental, social and governance (ESG) criteria may appear as a recent trend to many, but its foundation can be traced back to 2004 when the United Nations Global Compact (UNGC) released its report Who Cares Wins, encouraging financial market stakeholders to adopt ESG principles for the long term, highlighting the benefits of responsible investment and the positive impact on society and the environment.

Recently, ESG has gained attention in Malaysia with the prime minister’s announcement of Budget 2024. The budget allocated significant funds to promote ESG practices in businesses by introducing various tax deductions, incentives and exemptions for companies’ ESG-related spending.

One of the reasons the Malaysian government is dedicated to promoting ESG practices is to ensure Malaysia can maintain effective access to global supply chains and markets, which are increasingly ESG-sensitive.

EU initiatives and their impact on Malaysia

In May 2024, the European Union (EU) Council approved and formally adopted the Corporate Sustainability Due Diligence Directive (CSDDD), mandating rigorous due diligence to identify and mitigate adverse human rights and environmental impacts across operations and supply chains. Malaysian companies engaging with EU markets, particularly in industries prone to issues like forced labour, must navigate these regulations carefully to avoid penalties and ensure continued market access.

Environmental

The Environmental pillar focuses on managing emissions, energy usage, water resources, waste and materials sourcing to conserve natural resources, and is primarily governed by the Environmental Quality Act 1974.

In a significant development, the Energy Efficiency and Conservation Bill 2023 was passed in April 2024, mandating companies to develop energy management systems, conduct periodic energy audits and submit efficiency reports, aiming to reduce energy wastage across all sectors.

Social

The Social pillar focuses on upholding human rights and employment standards, effective employee management, promoting diversity, equity and inclusion, ensuring occupational health and safety, consumer protection and community engagement.

Companies must address critical issues such as forced labour and child labour, guided by laws such as the Children and Young Persons (Employment) Act 1966, the Employment Act 1955, and international standards such as ILO Conventions.

Malaysia must address issues such as forced labour and employee welfare to ensure ESG compliance. Non-compliance can lead to significant business losses, particularly in markets such as the US and EU. For instance, the US Customs and Border Protection agency can issue a Withhold Release Order (WRO) against companies that violate ESG principles, banning their products from entering the US market. Such sanctions can severely impact business profits, causing greater financial damage than the cost of implementing proper compliance measures.

Another noteworthy development in June 2024 was the enforcement of the Occupational Safety and Health (Amendment) Act 2022, which increased penalties for workplace discrimination and recognised the equal importance of employees’ psychological health.

Governance

The governance pillar involves establishing a robust governance structure, implementing clear policies, managing and reporting risks transparently, preventing corruption and protecting customer privacy. This involves adherence to regulations such as the Companies Act 2016, the Malaysian Anti-Corruption Commission Act 2009, the Securities Commission Malaysia Act 1993 and so on.

Conclusion

Companies that have yet to adopt ESG practices have missed out on the opportunity to benefit from the market’s preference for ESG-compliant firms during the early adoption period of the “who cares wins” framework. However, it is not too late to seize the profitable benefits that ESG compliance can bring. As Malaysia is in the transition period to ESG regulation, early adopters stand to gain significant competitive advantages, enabling them to engage with EU and US companies, and avoid substantial future penalties and mandatory compliance costs after the transition period ends. These benefits far outweigh the investment in adopting ESG principles.

Therefore, it might be appropriate to reiterate that “who cares wins” during this transition period gives companies an opportunity to act promptly and take ESG practices seriously. Act now or miss out.

Source: The edge markets

Key Takeaways

With his Jackson Hole speech, Federal Reserve Chair Jerome Powell all but promised rate cuts were coming. That's cool. But it is why that matters. Is the economy struggling under tight monetary policy? Not really. Are asset markets beginning to crack and show signs of stress, causing angst among policymakers? Not really. Is inflation decelerating and the labor market cooling? Yes.

These "initial conditions" matter. The outlook for the economy and markets would be different if something were breaking. Breaking is bad. Cooling is an entirely different story.

Kansas City Fed Labor Market Conditions Index

Source: Kansas City Fed, as of 7/1/24.

Conveniently, the Kansas City Fed compiles major labor market indicators into a single, useful data series. The labor market has undoubtedly softened from its post-COVID peak. It should be noted how quickly the labor market went from Great Recession weakness to near-all-time tightness. The labor market is cooling, but it is not collapsing. Those two things can coexist.

Inflation Two Ways

Source: Bureau of Labor Statistics, as of 7/1/24.

The inflation story is not dissimilar. Inflation pressures have not magically collapsed, but-as Chair Powell made clear in his speech-it is all about confidence that the trend will continue. Confidence is different from a declaration of mission accomplished. Part of the confidence may stem from a dramatic return to normal on the goods side of inflation (commodities less food and energy). Goods inflation surged, then fell back to normal levels of deflation. Services tend to be stickier, but that has begun to fall as well.

Growth Has Been Good

Source: Bureau of Economic Analysis, as of June 2024.

Growth has held up well. There have been bumps along the way, but growth has not fallen off a cliff. GDP is useful, but final sales is a good check. Final sales strips the volatility of inventories and net exports from the calculation, and the private version goes a step further and eliminates the changes in government spending as well. Intriguingly, the quality of composition of growth over the past 18 months has been high, as evidenced by the steady growth in final sales.

All of that is to say, the rate cuts are coming without panic. The economy-as a whole-is fine. There have been headwinds. Manufacturing and housing have been rather dismal in the wake of interest rate increases. But those are also set to benefit from the shift to a less restrictive stance from the FOMC. The headwinds of yesterday may well become the tailwinds of tomorrow. We will see.

Source: Federal Reserve Economic Data (FRED), as of March 2024.

There are questions no one wants to ask. What if corporate America navigated this cycle well and the historically elevated multiples reflect management competence instead of investor euphoria? What if rate cuts are not stoking a bubble-they are extending a nominal GDP and wage mini-boom? What if investors should be worried-not by budget deficits or the fall of the dollar, but 1) that the U.S. economy has plowed through every hurdle; 2) the promised recession never materialized; and 3) COVID-19 resulted in better supply chains and a more diversified economy?

When looking to the future, there are always reasons to be fearful. Maybe it's not that bad. Maybe it's even good. Maybe it's great. The future should be embraced, not feared. There are plenty of headwinds for the U.S. economy. But those may well be the tailwinds of tomorrow.

Source: SEEKING ALPHA