Mag 7 stocks, earnings, "hands off" the Fed and Jeffrey Sachs at ADF

Jeffrey Sachs at ADF (April 11-13, 2025): views on Trump’s economic policies

Jeffrey Sachs, professor at Columbia University, recently spoke at the Antalya Diplomacy Forum in Turkey, which was entitled “Reclaiming Diplomacy in a Fragmented World”.  If you are a Trump supporter, you might not like Dr Sachs’ explanation of the economic policies of this administration, although I think he uses fairly simple analogies to expose the fallacies of starting and promulgating a global trade war.  You can find the video of Dr Sachs speaking at the ADF on YouTube here.

Mag 7 update: TSLA and GOOG earnings are this week

Two Mag7 companies are scheduled to report earnings this week: TSLA this afternoon after the close and GOOG on Thursday, also after the close. 

• TSLA: consensus revenues and EPS are $21.85 billion and $0.35/share, respectively

• GOOG: consensus revenues and EPS are $75.53 billion and $2.01/share, respectively

I wrote about the Mag 7 companies in an article at the beginning of April (before “Liberation Day”) that you can find here.  It provides some good context in terms of where the stock prices have drifted since then (lower). 

The table below is the same one I used in the earlier article and provides some background about each companies’ operating performance and trends.  The data reflects the most recent quarter,  i.e. end of December 2024, except NVDA which is end of January 2025.

The table below, also updated from the early April article, shows various valuation metrics for the esteemed group as of the close on April 21. 

For context, S&P 500 P/E ratio (TFQ) as of last Thursday close was 25.1x, the forward P/E ratio was 19.2x, and the price-to-sales ratio was 2.68x.  The PEG of the S&P 500 index is currently 3.45x, and the dividend yield is 1.42%.  

Depending on how you view the “value added” of each of these rudimentary ratios and taking into consideration recent growth and operating trends, both GOOG and META seem relatively cheap and TSLA massively over-valued to the point of stupid, but recall that TSLA is essentially a meme-like stock.  It is interesting that GOOG and META are both in the sites of anti-monopolistic governments, and either could be forced to pay considerable fines or even forced to break up.  Both are also inherently cyclical because they are dependent on advertising revenues. 

As far as NVDA, its PEG was just revised upwards due to the Trump administration’s decision to limit sales by the company of a scaled-down AI chip to China (bottom-line impact of $5.5 billion).  I still view NVDA as decent value given its growth, operating margins and (declining) share price. I continue to have questions around the price of AAPL, simply because growth of the core iPhone growth is slowing, and this Mag 7 superstar company is most likely to be negatively affected by the Trump trade war (both end sales and supply chains).  The stock, well off its recent lows, still seems expensive to me.    

The table below shows each stock’s performance during 2024, the first quarter of 2025, and year-to-date.

For context, the S&P 500 is down 12.3% YtD, so every one of the Mag 7 stocks has underperformed the broader index so far this year. 

You can draw your own conclusions, but the reality is that the valuation of Mag 7 stocks are looking increasingly reasonable, at least in the context of valuation metrics for the broader market.  However, like all stocks at the moment, these tech giants remain under significant market pressure as overall valuations decline and clouds build on the economic horizon.

Earnings for S&P 500 companies this week

In total there are 114 S&P 500 companies scheduled to report earnings this coming week, including – in addition to TSLA and GOOG – VZ, GE, BA, T, AAL, MRK, PEP, PG, CL and HCA.  The theme seems to be industrial and consumer products companies.   A good source for looking at upcoming earnings is earningswhispers.com.

Hands off the Fed (please)!

Every time that I want to believe that the Trump administration could not destroy market value further, it manages to do so.  Mr Trump makes a sport of deflecting blame.  Given the poor global receptivity of his errant trade policies, it is no surprise that he is wanting to go after Jerome Powell, chairman of the Federal Reserve.  I would emphasise that this sort of ill-advised strategy is yet another example of Mr Trump chipping away at the integrity generally of the US political and economic system that – in the past – has made America exceptional.  However, markets speak for themselves – US stocks got absolutely hammered on Monday (S&P 500 down 2.4%), along with the US Dollar (DX-Y index down 1.1%, it’s lowest level since Feb 2022).  US Treasuries were mixed, with yields slightly lower at the short end (Fed-sensitive) of the curve, but higher at intermediate and longer-term maturities.  Even Treasuries were nowhere to hide on Monday.

To be open minded, it needs to be recognised that neither Mr Powell nor the Fed are infallible.  Recall that the Fed, under Mr Powell’s leadership, left monetary policy too easy for too long when it was clear that inflation was increasing in 2021 following gobs of pandemic fiscal stimulus.  By acting too late, inflation continued to increase, although the Fed eventually tightened policy and – by doing so – managed to get inflation back to within reach of target.  To the Fed’s credit, this has been orchestrated without the US economy going into a recession.  The jobs market and economy remained strong until the time that Mr Trump was inaugurated, although unfortunately, expectations are now that the administration’s current fiscal policies will bring the economy crashing down and will put pressure on prices.  Keep in mind that these are Mr Trump’s chosen fiscal policies and have nothing to do with the Fed.  Even so, the Fed will face a difficult decision ahead, as its so-called twin mandates could come into conflict. 

Should Mr Trump try to remove Mr Powell before his term expires, my guess is that stocks would experience a downturn in line with Monday’s sell-off, and it would easily test the early April lows.  Let’s hope this doesn’t happen.