This week’s reports from Telsa & Alphabet are investors’ first look at Mega-cap Tech companies' performance during the second quarter. Reports from these names are particularly interesting to Wall Street as this small cohort is responsible for most of this year’s gains. The overnight selloff doesn’t surprise MM as it was triggered by the perfect storm of an overbought market, high expectations for earnings and a seasonally weak period for equities. The local market is set to test 7900 support again today, but with the “glass half empty” attitude adopted by US stocks overnight, it feels 50-50 whether it will hold.
Kamala Harris looks almost sure to be the Democratic candidate to take on Trump on November 5th. She will be a more challenging adversary than Biden, but the betting odds still say she has a mountain to climb over the coming months. We will look at what the “Trump Trade” means for some ASX names later this week, but one sector that continues to dive lower with Trump set to reverse the Biden administration's new climate policies is the EV-related names. However, with Harris having a more than 40% chance to win in November, we thought the sector might see at least some short-covering, but it's not been evident so far this week.
European markets bounced strongly overnight, with the EURO STOXX 50 closing up +1.45% as dip buyers waded back into US futures. US stocks rebounded following their worst week since April as investors embraced a stronger Democratic candidate. This enabled them to focus on the looming major earnings reports, with Tesla and Alphabet facing the music on Tuesday. The political news is unlikely to materially impact the market unless Harris can dent Trump's apparent significant lead, something Biden was unlikely ever to do. By the close, the S&P500 had risen the most since June, with the “Magnificent Seven” up around 2.5% while the small-cap Russell 2000 added +1.7%. Crowdstrike (CRWD US) fell another 13% as the magnitude of the weekend blackout hit home and, of course, the prospect of litigation on the horizon.
The Dow Jones tumbled over 500 points on Thursday night, although it's the only major US index on track to finish the week higher. As we enter the gauntlet of the seasonally weakest two months, there's room for further downside in the coming weeks, with markets trading at lofty valuations around all-time highs. With stocks already factoring in three rate cuts into January, there is room for disappointment. Ironically, Nvidia (NVDA US) and Meta Platforms (META US) bounced overnight after their recent sharp falls leaving the sellers to focus on the broad market.
Overnight saw mixed sessions in Europe and across US indices; the UK FTSE edged up +0.3% while the EURO STOXX 50 fell 1.1% as investors anticipate a period of growth-friendly policies and political stability in the U.K. under the newly elected Labour government. Conversely, France continues to deliver uncertainty. In the US, the rotation out of high-flying mega-cap tech stocks into the more rate-sensitive names continued, with the Dow rallying +0.6% while the NASDAQ closed down -2.9%. The Russell 2000 (small cap) index slipped 0.7%, ending its five-day winning streak, which had delivered an advance close to 12% as the market rally broadened out on rate cut expectations.
US equities continue to punch higher with a large degree of “catch-up” unfolding across the board, e.g. while the small caps surged +3.5%, the high-flying Nvidia (NVDA US), Microsoft (MSFT US) and Alphabet (GOOGL US) all declined as investors appeared to go in search of value. The Dow rallied 740 points, delivering its best day in more than a year and posting new all-time highs in the process. Reporting season has kicked off positively, while Industrial bellwether Caterpillar (CAT US) up over 4% overnight, trumped by United Health (UNH US), with the insurer surging +6.5% after delivering better-than-expected second-quarter results. The Financials advanced again after earnings from Bank of America (BAC US) and Morgan Stanley beat analyst expectations, with BAC jumping more than 5%.
Monday saw all 11 sectors close higher, with the “Big Four” banks, BHP Group (BHP) and CSL Ltd (CSL), all adding to the day's +0.7% advance. However, less than 70% of the main board closed higher, with buying solid rather than euphoric. The only pocket of the Materials index that struggled after the assassination attempt on Former-President Trump was the lithium/ESG names, with the Republican candidate surging ahead of Biden at the Bookies, e.g. Liontown Resources (LTR) -3%, Pilbara (PLS) -1.3% and IGO Ltd (IGO) -1.2%. A Trump victory is good news for oil & gas as opposed to EVs, etc., as he intends to reverse Biden's climate policies.
The 2nd week of July enjoyed a dovish testimony from Jerome Powell and a lower-than-expected US CPI print (inflation), both bullish for equities, but some sectors more than others. We are now looking for bond yields and interest rates to turn lower over the coming year, which should drive some reversion on the stock/sector front. At MM, we constantly evaluate our performance from a service (survey coming this week) and portfolio performance perspective, and the standout factor of the latter is that our outperformance has come from sector and stock tilts i.e. focussing on being in the right sectors & stocks at the right time, rather than picking market direction
Will it be 3rd time lucky for the local market to attempt to break out to fresh all-time highs? We believe the answer is yes, but it certainly feels like it’s now or never, as global equity markets position themselves for lower interest rates without pricing in any meaningful risk of a recession. As for politics, equities are saying who cares if France has an unworkable government and the US is on course for a second term of a Trump Presidency. Investors are focusing on the prospect of declining interest rates while ignoring rising valuations and macro uncertainties percolating beneath the surface. This will change at some time, but for now, it’s a dangerous game fighting the bullish tape, particularly if US earnings season delivers.
Kamala Harris looks almost sure to be the Democratic candidate to take on Trump on November 5th. She will be a more challenging adversary than Biden, but the betting odds still say she has a mountain to climb over the coming months. We will look at what the “Trump Trade” means for some ASX names later this week, but one sector that continues to dive lower with Trump set to reverse the Biden administration's new climate policies is the EV-related names. However, with Harris having a more than 40% chance to win in November, we thought the sector might see at least some short-covering, but it's not been evident so far this week.
European markets bounced strongly overnight, with the EURO STOXX 50 closing up +1.45% as dip buyers waded back into US futures. US stocks rebounded following their worst week since April as investors embraced a stronger Democratic candidate. This enabled them to focus on the looming major earnings reports, with Tesla and Alphabet facing the music on Tuesday. The political news is unlikely to materially impact the market unless Harris can dent Trump's apparent significant lead, something Biden was unlikely ever to do. By the close, the S&P500 had risen the most since June, with the “Magnificent Seven” up around 2.5% while the small-cap Russell 2000 added +1.7%. Crowdstrike (CRWD US) fell another 13% as the magnitude of the weekend blackout hit home and, of course, the prospect of litigation on the horizon.
The Dow Jones tumbled over 500 points on Thursday night, although it's the only major US index on track to finish the week higher. As we enter the gauntlet of the seasonally weakest two months, there's room for further downside in the coming weeks, with markets trading at lofty valuations around all-time highs. With stocks already factoring in three rate cuts into January, there is room for disappointment. Ironically, Nvidia (NVDA US) and Meta Platforms (META US) bounced overnight after their recent sharp falls leaving the sellers to focus on the broad market.
Overnight saw mixed sessions in Europe and across US indices; the UK FTSE edged up +0.3% while the EURO STOXX 50 fell 1.1% as investors anticipate a period of growth-friendly policies and political stability in the U.K. under the newly elected Labour government. Conversely, France continues to deliver uncertainty. In the US, the rotation out of high-flying mega-cap tech stocks into the more rate-sensitive names continued, with the Dow rallying +0.6% while the NASDAQ closed down -2.9%. The Russell 2000 (small cap) index slipped 0.7%, ending its five-day winning streak, which had delivered an advance close to 12% as the market rally broadened out on rate cut expectations.
US equities continue to punch higher with a large degree of “catch-up” unfolding across the board, e.g. while the small caps surged +3.5%, the high-flying Nvidia (NVDA US), Microsoft (MSFT US) and Alphabet (GOOGL US) all declined as investors appeared to go in search of value. The Dow rallied 740 points, delivering its best day in more than a year and posting new all-time highs in the process. Reporting season has kicked off positively, while Industrial bellwether Caterpillar (CAT US) up over 4% overnight, trumped by United Health (UNH US), with the insurer surging +6.5% after delivering better-than-expected second-quarter results. The Financials advanced again after earnings from Bank of America (BAC US) and Morgan Stanley beat analyst expectations, with BAC jumping more than 5%.
Monday saw all 11 sectors close higher, with the “Big Four” banks, BHP Group (BHP) and CSL Ltd (CSL), all adding to the day's +0.7% advance. However, less than 70% of the main board closed higher, with buying solid rather than euphoric. The only pocket of the Materials index that struggled after the assassination attempt on Former-President Trump was the lithium/ESG names, with the Republican candidate surging ahead of Biden at the Bookies, e.g. Liontown Resources (LTR) -3%, Pilbara (PLS) -1.3% and IGO Ltd (IGO) -1.2%. A Trump victory is good news for oil & gas as opposed to EVs, etc., as he intends to reverse Biden's climate policies.
The 2nd week of July enjoyed a dovish testimony from Jerome Powell and a lower-than-expected US CPI print (inflation), both bullish for equities, but some sectors more than others. We are now looking for bond yields and interest rates to turn lower over the coming year, which should drive some reversion on the stock/sector front. At MM, we constantly evaluate our performance from a service (survey coming this week) and portfolio performance perspective, and the standout factor of the latter is that our outperformance has come from sector and stock tilts i.e. focussing on being in the right sectors & stocks at the right time, rather than picking market direction
Will it be 3rd time lucky for the local market to attempt to break out to fresh all-time highs? We believe the answer is yes, but it certainly feels like it’s now or never, as global equity markets position themselves for lower interest rates without pricing in any meaningful risk of a recession. As for politics, equities are saying who cares if France has an unworkable government and the US is on course for a second term of a Trump Presidency. Investors are focusing on the prospect of declining interest rates while ignoring rising valuations and macro uncertainties percolating beneath the surface. This will change at some time, but for now, it’s a dangerous game fighting the bullish tape, particularly if US earnings season delivers.
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