STEP ASIDE, BANKS. TESLA AND NETFLIX EARNINGS ARE THE REAL TESTS

Forget banks—third-quarter earnings season doesn’t start until Wednesday, when Netflix and Tesla report.

Since Alcoa’s (ticker: AA) abdication, the kickoff of earnings season has been assigned to the U.S.’s big banks, including JPMorgan Chase (JPM) and Citigroup (C), which reported earnings on Friday. This despite the fact that some large, prominent companies, including PepsiCo (PEP) and Delta Air Lines (DAL), disclosed their results earlier in the week.

Don’t expect the overall market to care too much about how the banks do. The S&P 500 financials sector, which includes banks and insurers but also Visa (V) and Mastercard (MA), totals 12.7% of the index’s market value. Its earnings contribution is expected to be larger, at 17.4% of third-quarter earnings, according to data from Refinitiv. But these days, the banks are less a reflection of the U.S. economy than they are of monetary and regulatory policy, which take up a good portion of their earnings calls.

No, earnings season doesn’t really get started until Wednesday, when the first of the large technology-oriented stocks that have driven the S&P 500 this year are set to report. That would be Tesla (TSLA) and Netflix (NFLX), followed by Alphabet (GOOGL), Microsoft (MSFT), Meta Platforms (META), Amazon.com (AMZN) next week, and then Apple (AAPL) on Nov. 2. Nvidia’s (NVDA) fiscal third quarter doesn’t end until Oct. 31, and it will report in late November.

The Magnificent Eight punch well above their fundamental weight, thanks to premium valuation multiples. The group makes up roughly 30% of the S&P 500’s market capitalisation but is expected to contribute just 10% of the index’s third-quarter sales and 16% of earnings, according to Refinitiv. Hits and misses from their results will prompt outsize moves in the index.

Take Meta, which Wall Street analysts expect to report $8.0 billion in earnings for the third quarter, up 120% from the same period last year. That’s nearly a full percentage-point contribution to the S&P 500’s overall expected earnings growth in the quarter.

Nvidia is responsible for another 1.5 percentage point of expected growth, Amazon for 0.6 point, and Alphabet and Microsoft for 0.5 point each. With growth rates like those, how well the biggest companies on the market do could meaningfully swing overall S&P 500’s earnings growth one way or another.

There’s a slim margin for error: Analysts are predicting 1.3% year-over-year earnings growth from the S&P 500 in the third quarter, per Refinitiv. The biggest expected individual detractors from the index’s year-over-year earnings growth are Exxon Mobil (XOM)—a 1.9-percentage-point drag—and Pfizer (PFE), a 1.5-point drag.

That’s before considering the potential impact to investor sentiment from Big Tech’s results. In a year dominated by macro themes, the enthusiasm around artificial intelligence has been one of the greatest bullish drivers of the stock market. Nvidia’s results are showing the benefit already, while other companies are more likely to be merely talking up the technology’s transformative potential.

Hype can only go so far—eventually even Microsoft, Meta, and Alphabet will need to show that their AI investments are yielding a positive return. The third quarter of 2023 is still early innings in the AI revolution, but signs of progress will be cheered by investors, and may be necessary to justify many of the Magnificent Eight’s huge rallies this year.

Third-quarter earnings season may have officially kicked off, but the real action has yet to begin.

A new investment fund targeting celebrity-founded consumer brands has secured US$40 million in commitments and is rapidly approaching its US$50 million fundraising target, signalling growing investor appetite for alternative opportunities beyond traditional asset classes.

The Global Talent Fund, which has a maximum raise of US$100 million, focuses on building and investing in consumer businesses alongside celebrities, athletes, and influential personalities who play an active role as co-founders rather than simply endorsing products.

The strategy is based on the belief that changes in consumer behaviour, particularly the rise of social media and digital engagement, have fundamentally altered how brands are built and scaled.

GTF founding partner Jeremy Hunt, who is helping lead the fund’s strategy, said consumers increasingly feel connected to personalities they follow online and are more willing to support products developed by those individuals.

“Consumers are searching for content to engage with, and when a celebrity they like or follow takes them on the journey of creating a product or brand, they genuinely feel part of that process,” he said.

The fund is targeting high-growth consumer sectors including wellness, hydration, beauty and recovery, areas Hunt believes continue to benefit from strong global demand and ongoing innovation.

Rather than backing celebrity endorsement deals, the fund is seeking businesses where talent is deeply involved in product development, brand creation and long-term growth.

According to Hunt, authenticity remains one of the biggest differentiators between successful celebrity-backed brands and those that fail.

“The consumer can see clearly if someone is simply being paid to promote a product,” he said. “The winners are typically the brands where the celebrity has genuinely helped build the business from the ground up.”

The model has attracted support from several prominent Australian investors and business families, reflecting broader interest in alternative investments with global growth potential.

Hunt said consumer brands offered a level of tangibility that many investors found appealing.

“Consumer brands are what we touch, feel, smell and taste every day,” he said. “Our investors understand the growth potential in the model, but they also want to be part of the journey.”

The fund’s rapid progress towards its fundraising target comes amid growing recognition that celebrity influence, when combined with strong commercial execution and scalable business models, can create significant enterprise value.

With several high-profile celebrity-founded businesses generating billion-dollar exits in recent years, supporters of the strategy believe the opportunity remains in its early stages.

STEP ASIDE, BANKS. TESLA AND NETFLIX EARNINGS ARE THE REAL TESTS

With US$40 million already committed, the Global Talent Fund is attracting investor attention with a strategy focused on building globally scalable consumer brands alongside high-profile talent.