Here at Vestact, we avoid stocks in the financial services sector. That means banking, life insurance, health insurance, short-term insurance, underwriting, investment management, mortgage lending, accounting and tax advisory companies.

There are two main reasons. The first is that they have cyclical earnings and take strain during recessions. The second is that they are very heavily regulated, and are usually required to hold a lot of capital to cover potential losses. Innovation and risk-taking behaviour are discouraged.

We used to own shares in JPMorgan up until 2021, but sold them due to their stagnant share price. At the time, banks all traded on a 10 times price to earnings ratio. After we sold, the shares went up, because the global economy grew. That's their new headquarters building in Midtown Manhattan in the picture.

Now, AI seems set to finally improve margins in the sector. According to a report from Citigroup, over half of banking jobs could be automated, especially routine back-office and customer service tasks.

There are some ways that AI is hurting profit margins though. The world's $7.5-trillion-a-day foreign exchange market is becoming less lucrative because volatility is dwindling. Algorithms and automated trading are blunting FX-market price spikes, which market-makers loved because they could front-run their clients (they typically rely on strong price swings to hide fat fees).

We will keep an eye on these trends. For now, we are happy to be invested in tech, healthcare and consumer stocks, but things could change.

I recently read a study by a fellow called Jurrien Timmer. He is the director of Global Macro at Fidelity Investments. His work showed that the current bull market has been, for the most part, driven by earnings.

According to the data, earnings are up 11% per annum since the 2022 lows. Price-to-earnings expansion has only increased 1% per annum since then.

This means that the underlying fundamentals of the rally are based on cold, hard facts. Companies are making more money and that is why share prices are going up. The current market levels are not based on "fugayzi fugazi. It's a whazy, It's a woozie, It's fairy dust, It doesn't exist."

If you do not know what that means, go and watch The Wolf of Wall Street right now!

There are many different ways to make money (and lose it) in the stock market. From short-term traders, jumping in and out of stocks based on sentiment, 10-minute price charts and the latest TikTok trend, to very long-term buy-and-hold investors.

At Vestact, we are firmly on the latter part of that spectrum. We look for long-term trends, identify the leading companies in those sectors, and then buy with the intention of holding for decades. It is very important to know your lane and then stick to it. Jumping between strategies is a sure way to underperform.

As Paul mentioned above, part of our strategy is to avoid companies that operate in cyclical sectors, like financial services or the commodity miners. Recently, there have been a number of clients asking if we should be buying gold mining shares. Our simple answer is, 'No'.

Commodity producers are "price takers", with very cyclical earnings; during the good times, gold miners have amazing margins, but when the bullion price turns, things are terrible. There is too much luck involved in trying to pick the peaks and bottoms of the gold market.

It is important as an investor to be comfortable with the idea that you can't own everything. Know your strengths and your strategy, focus on that. It then becomes easier to ignore all the shares that you don't own, but are doing well.

Kering's new CEO, Luca de Meo, wasted no time in hitting 'reset'. The luxury group is selling its beauty division, including the recently acquired House of Creed, to L'Oreal for EUR4 billion. The two will also team up on future beauty and fragrance lines for Gucci, Balenciaga, and Bottega Veneta.

It's a full U-turn from Kering's prior plan to go solo in beauty. The move gives de Meo cash to cut debt (EUR10.5 billion and counting) and room to focus on fixing the fashion core. The market likes it, Kering shares jumped 5.5% on Monday, now up around 86% since de Meo's appointment in June.

L'Oreal, meanwhile, gets long-term licenses across Kering's portfolio and cements its hold as the world's beauty powerhouse. Sometimes the smartest luxury move is knowing when to let someone else do the heavy lifting and take the royalties.

Margaret Thatcher believed that there is no such thing as society. The market exists to do price discovery - If the price of your labour is less than you need to survive, too bad.

Superbugs are on the rise. Over-prescribing of antibiotics is part of the cause - South Africa ranks second in antibiotic use.

Asian markets are mostly in the red this morning, with sharp losses in Australia and Japan. SoftBank shares are down 5%, after being down 11% earlier in the session, due to weak sentiment in the semiconductor industry.

In local company news, Coca-Cola HBC is buying a 75% stake in Coca-Cola Beverages Africa for $2.6 billion, paving the way for a long-awaited JSE listing by 2026 and creating the world's second-largest Coke bottler.

US equity futures are unchanged pre-market. The Rand is trading at around R17.23 to the US Dollar.

Have a nice Wednesday, you are half way to the weekend.