Just like a passionate football fan shouting instructions at the manager from the stands, unaware of the years of effort, experience, and education that led the manager to their position, some people believe they know better. For example, the fan who drives a lorry from Monday to Friday and thinks they’ve got the game all figured out: “You should have played 4-4-2. That substitution was a mistake, coach. Get it together!” The financial markets, like the game of football, are complex and require a deep understanding to navigate effectively. However, we see many individuals in suits telling the world that they have it right and that the central bankers don’t know what they’re doing.
My frustration peaks when I hear the self-proclaimed YouTube economic ‘gurus’ confidently predicting the next market crash from their makeshift home studios. Their arrogance is not just evident; it’s palpable. They sit in front of a camera, telling you exactly what will happen, convinced they have all the answers. ‘Jerome Powell has it all wrong,’ they declare. ‘He should be cutting rates today. The guy’s an idiot!’ They make these claims from the comfort of their spare bedroom, feeling invincible because they made some quick cash trading Tesla.
Everyone is entitled to an opinion, but after years of research and countless early mornings poring over economic data from the U.S. and the U.K., I’ve come to understand that the truth is far more complex than these armchair experts suggest. The financial markets are not a game of certainty but a complex system that demands a deeper understanding, an understanding that is beyond my capabilities. When the Consumer Price Index (CPI) comes in hot, the ISM Manufacturing data is weak, and the yield curve inverts, they loudly proclaim disaster for the economy and the stock market. Financial influencers on social media scream ‘SELL!’ at the top of their lungs, and their bearish videos rack up views as anxious investors flock to these ‘market sages’ for guidance.
Then, a few days later, the Producer Price Index (PPI) data is released, and suddenly, it’s, “Oh, things aren’t so bad—buy stocks!” The market’s unpredictability is a stark reality. The whiplash is dizzying, and it’s a clear indication of the risks of following the advice of these self-proclaimed experts.
There have been times when these influencers have swayed me, convinced they knew more about the economy than I did. I hung on their every word, hoping to glean some insight. I have no formal qualifications in economics—just a keen interest in what’s happening around me. Realising that I don’t know what is happening has humbled me. It’s a reminder of the importance of humility in acknowledging our limitations and seeking advice from those with the necessary expertise, like those sitting on the Federal Reserve and the Bank of England.
I am acutely aware of my small and insignificant place in the vast world of investing. I’d love to say that I have it all figured out and that I know exactly where the economy and my favourite stocks are headed, but the truth is, I don’t. Many times, I’ve spent hours dissecting a company’s annual report, searching for that elusive detail that might give me an edge, hoping that one day I’d be the first to realise a company’s price-to-earnings ratio was poised to skyrocket from 5x to 50x.
But recognising my limitations, I’ve shifted my approach. Instead of trying to outsmart the market by finding “cheap” stocks to buy low and sell high, I’ve adopted a strategy of following the crowd. Now, I focus on buying high and selling even higher, aligning myself with the enthusiasm of other investors. This approach offers a sense of reassurance, trusting in the market’s collective wisdom rather than trying to outthink it.
Of course, I don’t just follow the hype blindly. I ensure that any company I invest in has solid fundamentals and shows a strong technical trend on the chart. This balanced approach, focusing on the company’s foundation and market performance, allows me to confidently participate in the market.
I want to convey that investing and trading are accessible to anyone, no matter their educational background. You don’t need to be a financial expert or graduate from the London School of Economics to participate. What you need is curiosity, a willingness to learn, and the humility to recognise your limitations. Imposter syndrome may influence our decision-making, but I believe that you have just as much chance of “guessing” market movements as the so-called experts.
The recruitment industry is currently grappling with significant challenges, as evidenced by companies like Hays, which recently reported a staggering 92% drop in annual profits. This downturn is primarily driven by employers’ cautious approach to hiring, especially in the wake of recent political changes. The resulting subdued activity levels and extended hiring times have severely impacted the profitability of recruitment firms.
I closely monitor recruitment trends in these uncertain economic times as a critical indicator of a potential recession. While I may not have the expertise to analyse every economic report that comes our way, observing the world around me provides valuable insights. I vividly recall the lead-up to the 2007 financial crisis, witnessing firsthand the struggles of family and friends on the brink of layoffs, me included. The difficulty of finding new employment during that period left a lasting impression, underscoring the importance of paying attention to employment data.
Declines in job availability often confirm that we may already be in a recession, but there are earlier signs worth watching. By examining data from other sector, such as slowing sales, reductions in capital expenditure, and cutbacks in marketing budgets, we can identify warning signals of an impending downturn before it fully unfolds. When combined with employment trends, these indicators offer a more comprehensive view of the economic landscape, helping us prepare for what may lie ahead.
Hays, a market leader operating in 33 countries, has been particularly hard-hit in the UK and Ireland, where profits plummeted by 78%. This reflects a broader trend of reduced confidence among employers and potential job candidates, exacerbated by economic and political uncertainties. Even after Labour secured a strong majority, demand for recruiting and consultancy services has yet to rebound, highlighting ongoing hesitancy in the job market.
The challenges faced by Hays are not unique; other recruitment firms like Page Group and Robert Walters have also reported significant declines in profits and share prices. I recently sold my position in Robert Walters due to a lack of confidence in the recruitment sector, further underscoring the importance of closely monitoring this data. The reluctance of workers to change jobs and the cautious approach businesses are taking toward hiring have created a tough environment for recruitment firms, as evidenced by widespread job cuts and falling net fees.
As market conditions remain volatile, driven by low confidence levels and extended hiring processes, staying informed through comprehensive research on employment data is essential. This data helps in understanding the current state of the job market and predicting potential shifts that could impact investment decisions.
Given the current landscape, I am considering adding Hays to my recruitment watchlist, which currently includes Sthree (STEM) and Robert Walters (RWA). Although the entire sector has been beaten down, I see these companies as strong market leaders that are likely to bounce back as the economy improves. By analysing the charts of these companies, it’s clear how they reflect the ups and downs of the wider economic environment. These businesses have weathered booms and busts, recession after recession, and are still standing today. This resilience presents an opportunity to profit from the next economic cycle.
I will closely monitor Hays’ earnings reports. Obviously, I want to see improved numbers and investor confidence return. Looking at the chart, the stock is clearly in a downward trend, so I would like to see higher highs and higher lows supported by volume. At the same time, I want to have confidence that the whispers of a “recession” are clearly behind us.
H&T Group plc, a venerable institution in the financial services sector, has been a critical financial resource for many since its founding in 1897. While its core business revolves around pawnbroking, H&T also provides various other services, including personal loans, gold purchasing, retail services, and foreign exchange. Headquartered in Sutton, UK, the company operates online and through a widespread network of in-store locations, making it accessible to a broad audience.
In times of economic uncertainty, businesses like H&T offer a unique lens through which to gauge the state of the economy. Unlike industries such as recruitment, which often struggle during downturns as companies reduce hiring, pawnbroking tends to thrive. As traditional financial avenues become less accessible, more individuals turn to pawnbrokers for quick liquidity. This makes H&T a potential bellwether for economic distress, as increased demand for its services typically indicates that consumers are facing heightened financial challenges.
H&T’s recent trading update, released in August 2024, highlights the company’s resilience in growing economic uncertainty. The report showed a robust increase in revenue and profits, driven by a surge in demand for its pawnbroking services. This uptick clearly signals that more people are under financial strain, seeking alternatives like pawnbroking when other options are out of reach.
The latest earnings report is particularly revealing. H&T’s pledge book—a critical metric in the pawnbroking industry—has grown significantly, reaching record levels. Additionally, the company noted increased activity in gold purchasing and personal loans, further underscoring household financial pressures. Management expressed strong confidence in the business’s outlook, pointing out that economic downturns often lead to higher demand for H&T’s services.
This situation raises an important ethical question: Is profiting from others’ financial struggles right, or is H&T providing a necessary service to those with limited options? Despite its controversial reputation, pawnbroking offers a vital lifeline for individuals who might otherwise have nowhere else to turn. For some, it provides access to urgently needed funds without the hurdles of credit checks or lengthy approval processes, which can be crucial during economic distress.
For investors, the traditional strategy often involves waiting for the economy to recover, positioning themselves to benefit from eventual upswings in sectors like recruitment. However, companies like H&T present a different proposition—they have the potential to deliver gains even as the recession deepens. This dual approach offers a more balanced investment strategy, capitalising on opportunities during economic downturns and recoveries.
Currently, the market’s chart for H&T indicates a downtrend, reflecting low investor confidence amid uncertainty about the UK economy’s direction. Observing whether this sentiment shifts as the situation evolves will be interesting. With the recruitment sector slowing, will we see an uptick in loans and activity from companies like H&T? The answer to this question could provide further insight into the broader economic landscape and inform future investment decisions.
Why JD Sports is Still on My Watchlist
I have had my eye on JD Sports for quite some time for good reason. Watching the stock price climb over the years has been exciting and frustrating, mainly because I’ve been cheering from the sidelines rather than being actively involved. As I continue to follow the company’s journey, I can’t help but remain optimistic about its future. This is why I still have JD Sports firmly on my watchlist.
Market Leadership and Strong Brand Positioning
JD Sports has established a dominant position in the sports fashion sector in the UK and internationally. It is not simply a company that sells trainers and hoodies; it is a brand that connects with a younger, fashion-conscious demographic. JD Sports has nurtured a loyal customer base that consistently returns for more by providing a premium range of popular and exclusive brands. The stylish and inviting stores, often bustling with shoppers, are a testament to this strong brand appeal.
Consistent Financial Performance
Over the years, JD Sports has shown impressive financial resilience. Even during tough economic times, the company has managed to maintain strong revenue growth and profitability. This financial stability appeals to investors seeking a company that can navigate market challenges while keeping its balance sheet healthy.
Strategic Expansion and Acquisitions
One of the things I admire most about JD Sports is its strategic approach to growth. The company has not just expanded its footprint; it has done so thoughtfully. From acquiring Finish Line in the U.S. to entering new markets across Europe and Asia, JD Sports has diversified its revenue streams and reduced its reliance on any single market. The company’s move into the U.S. market was a strategic milestone that positioned it well in a lucrative and growing sector.
E-commerce and Omnichannel Strategy
In today’s retail landscape, a solid online presence is non-negotiable, and JD Sports understands this. The company has heavily invested in its e-commerce platforms, which have become significant revenue drivers, especially as more consumers shift towards online shopping. But it doesn’t stop there JD Sports also excels in blending online and in-store experiences, enhancing customer convenience and driving both types of sales. This omnichannel approach is a big part of what makes JD Sports resilient.
Resilience in Market Challenges
Speaking of resilience, JD Sports has shown an impressive ability to adapt, whether it’s during economic downturns or global disruptions like the COVID-19 pandemic. The company’s quick pivot to focus on digital sales and optimise its supply chain during these times has been reassuring. Operational efficiency, maintained through strategic inventory management and cost control, has kept the company steady, even when others in the sector have struggled.
Growth in the Athleisure Market
The global trend towards athleisure, where sportswear doubles as everyday clothing, has been a massive boon for JD Sports. The company’s focus on trendy, fashionable sportswear has particularly resonated with younger consumers, who drive growth in this sector. It’s clear that athleisure is not just a fad, and JD Sports is well-positioned to capitalise on this trend for years to come.
Challenges and Market Conditions
Of course, it hasn’t all been smooth sailing. The stock price has faced pressure recently due to higher interest rates, which have affected consumer spending, particularly among the younger demographic that JD Sports primarily targets. Additionally, the looming threat of Amazon’s dominance in the sportswear market is something to watch. However, I believe this threat is often exaggerated. JD Sports offers something that online giants can’t: a stylish, in-store shopping experience that customers enjoy. The fact that people still save their JD Sports shopping bags as a fashion statement says much about the brand’s cultural impact.
The Future: Expansion and Opportunities
The potential for JD Sports to expand into new regions is exciting. Markets in South America, Asia, the Middle East, and India all present attractive opportunities for growth. With a growing middle class and increasing interest in sports and fitness, these regions could be the next significant chapter in JD Sports’ story.
Why I’m Still Interested
Despite the recent challenges, I remain confident in JD Sports’ ability to bounce back stronger. The company has a solid foundation, a clear strategic vision, and room for growth. All these factors keep me interested in potentially getting involved with the stock. There is a lot of scope for JD Sports to continue its upward trajectory, and I’m eager to see where it goes next.
It’s a breakout! Lets get Technical
As we mentioned above, the stock price of JD Sports has decreased due to the rising interest rates and concerns about a possible economic downturn. Investors are worried that consumers may reduce non-essential spending, such as buying new Adidas Gazelles, leading to a decline in stock price. The stock chart shows a downtrend after years of strong gains, indicating that the market is preparing for challenging times, putting pressure on JD Sports. However, it’s important to note that the company’s core financials remain robust, which could pave the way for a recovery when the economic situation improves.
Based on the chart, JD Sports’ stock price recently hit a low and then settled into a consolidation range between 110p and 138p. Many investors seemed to believe that the price had bottomed out, holding it within this range. However, a positive trading update, indicating that earnings are expected to meet targets, boosted investor confidence, leading to a breakout from this consolidation phase.
Currently, the stock’s Price-to-Earnings (P/E) ratio is around 24x, which is below its five-year average of 28x. Historically, during market booms and periods of high consumer confidence, JD Sports has commanded a much higher P/E ratio—up to 65x—as investors bet on the company’s potential to outperform. Conversely, during times of economic uncertainty, when fears of recession take hold and consumers tighten their belts, the P/E ratio can drop as low as 14x.
Looking ahead, earnings per share (EPS) for JD Sports are estimated to be £0.12 for 2025, with an increase to £0.17 by 2027. Based on a P/E ratio of 28, which aligns with the company’s historical average, my price target is 392p, reflecting significant upside potential from the current price of 149p.
The big question now is whether we’re heading into a recession or if consumer confidence will rebound as interest rates stabilise. If disposable incomes increase and the consumer returns, there could be a revision in those earnings estimates, possibly driving investor sentiment higher and pushing the P/E ratio back to the highs seen during the last retail boom.
However, potential threats remain. Competition from players like Amazon continues to loom large, and the retail landscape is rapidly evolving. To protect our capital, it’s essential to keep a close watch on these developments and perform an in-depth risk analysis to navigate the uncertainties ahead.
We don’t have all the answers, and even the most confident social media influencers can’t predict the future. What I do know is that JD Sports is a well-managed company with significant potential for global growth. The leadership team has successfully navigated through various market downturns before, and they have the experience and capability to steer the company through challenging times again. While the future is uncertain, JD Sports’ strong foundation gives me confidence in its ability to overcome obstacles and continue to thrive.
Remember, at Omera, we are swing traders who focus on technical analysis, complemented by fundamental insights. We don’t dive deep into years of company reports or build complex discounted cash flow models. Instead, we base our strategy on a straightforward understanding of market trends and perform a thorough risk analysis to protect ourselves when things don’t go as planned. My price targets are based on this approach and have been successful for me personally, but they are basic and far from guaranteed.
It’s important to emphasise that this is not financial advice—these are just my personal thoughts and observations, and I am often wrong. Every investment carries risk, and it’s crucial that you do your own research and consider your financial situation carefully before making any decisions in the market.
