The world lost a legendary investor and business leader on Tuesday, when Charles Munger passed away at the age of 99. Munger was the vice chairman of Berkshire Hathaway, the conglomerate that he helped build with his longtime partner and friend, Warren Buffett. Munger’s wisdom and insights shaped the investment philosophy of Berkshire Hathaway, which has delivered stellar returns for its shareholders over the decades. In this article, we will explore Munger’s remarkable life story, his impact on the markets, and the key lessons that investors can learn from him.
US Stock Market Update
The US stock market reacted to Munger’s death with mixed emotions, as some investors paid tribute to his legacy while others focused on the latest economic data. The Dow Jones Industrial Average edged up 0.1%, while the S&P 500 and the Nasdaq Composite slipped 0.2% and 0.3%, respectively. The market sentiment was influenced by a stronger-than-expected GDP growth in the third quarter, which was revised up to 5.2% from 4.9%. However, the Federal Reserve also signaled that it may cut interest rates in 2024, amid rising inflation and slowing consumer spending.
Some of the notable movers in the corporate sector included General Motors, Gamestop, Crowdstrike, and Las Vegas Sands. General Motors announced a $10 billion share buyback program, boosting its stock price by 9.4%. Gamestop soared 20.5% ahead of its earnings report, as the meme stock continued to attract retail investors.
Crowdstrike jumped 10.4% after reporting strong earnings and revenue growth, driven by its cloud-based cybersecurity solutions. Las Vegas Sands dropped 4.9% after its largest shareholder, Sheldon Adelson’s estate, revealed plans to sell $2 billion worth of shares.
The US economy showed signs of resilience in the third quarter, as the GDP growth rate was revised upward to 5.2%, the fastest pace since the second quarter of 2020. The main drivers of the growth were nonresidential and residential investment, which both increased more than previously estimated. However, consumer spending, which accounts for about 70% of the GDP, slowed down slightly, especially in services. Corporate profits also rose by 4.1% in the third quarter, reaching the highest level in a year.
Wholesale inventories in the US decreased by 0.2% in October, indicating a tight supply chain situation. Durable goods inventories fell by 0.4%, while nondurable goods inventories rose by 0.1%. The trade deficit in goods widened to $89.8 billion in October, as exports declined by 2.2% and imports increased by 0.6%. The main categories that contributed to the drop in exports were consumer goods and vehicles.
Global Economic Sentiment
In the Euro Area, the economic sentiment indicator improved slightly to 93.8 in November, from 93.6 in October. However, the indicator remained below its long-term average of 100, reflecting a subdued outlook for the region. The sentiment improved in the Netherlands and France, but deteriorated in Spain, Germany, and Italy. The main factors that weighed on the sentiment were rising borrowing costs, high inflation, and the spread of the new COVID-19 variant.
Housing Market and Mortgage Trends
Mortgage rates in the US fell to 7.37% in November, the lowest level in ten weeks. According to the Mortgage Bankers Association. This led to a 0.3% increase in mortgage applications, marking the fourth consecutive weekly rise. Applications for new homes increased by 4.7%, while applications for refinancing decreased by 0.6%.
Currency Market Update
The Swiss franc appreciated against the US dollar in November, reaching 0.875 per USD, the highest level since early August. The franc benefited from the expectations that the Federal Reserve would lower interest rates in 2024. As well as the safe-haven demand amid global uncertainties. The Swiss economy, however, remained weak, with low inflation and slow growth. Limiting the scope for monetary policy tightening by the Swiss National Bank.
The death of Charles Munger marks the end of an era for Berkshire Hathaway and the investment world. Munger’s legacy and principles will continue to inspire and guide investors and business leaders for generations to come. The mixed economic signals in the US and abroad highlight the challenges and opportunities that the global economy faces in the post-pandemic era. Investors need to be vigilant, flexible, and adaptable to navigate the changing market conditions and seize the best opportunities.