The Federal Reserve is expected to cut interest rates next month after more than two years of hikes aimed at controlling pandemic-driven inflation. The market reaction has been extremely bullish, with the S&P 500 adding over $4.5 trillion in market cap in three weeks, while Treasury yields fell and gold reached all-time highs. Attention is now focused on Nvidia’s upcoming earnings report due on August 28th.
Month: August 2024
Weekly Newsletter – 16th August , 2024
US stocks experienced their best week since November 2023, rebounding sharply from a previous sell-off. Investors have taken heart from recent positive economic data and rushed back into markets. The tone is likely to remain bullish with bouts of occasional volatility.
Actionable Insight – August
The hike in interest rates by the Bank of Japan led to a sharp correction in USDJPY and an unwinding of the ‘carry’ trade. While this was expected, the effect was magnified by the release of softer than expected employment data in the US, which led to some panic selling. We believe some further volatility is likely before the dust settles.
Weekly Newsletter – 2nd August , 2024
Regular readers of our newsletter know that over the last several months we have repeatedly highlighted the fragility in the US economy, especially the contradictions between the official numbers and data gathered from other ‘real world’ sources. Accordingly, we have urged investors to be cautious about chasing high-flying names and instead focus on high-quality fixed income and gold. A couple of weeks ago, in our July 19th 2024 newsletter, we explicitly broadcast our expectation that markets are likely to correct sharply.
The events of the last couple of days have vindicated our stand.
Weekly Newsletter – 26th July , 2024
Both the S&P 500 and Nasdaq ended the week lower, with the Nasdaq facing significant declines. Earnings reports are highlighting concerns about overhyped AI investments and potential slowdowns in consumer spending. Alphabet’s results intensified doubts about AI returns, while Southwest Airlines, UPS, and Whirlpool raised fears about consumer pullback. The US economy grew at an annualized rate of 2.8% in Q2, surpassing expectations and the previous quarter’s growth. Market expectations are firmly set on a rate cut in September 2024. Small Caps have recently outperformed Large Caps significantly, with a 13% spread over the last 12 trading days. Major tech companies, including Microsoft, Meta, Amazon, and Apple, are set to release their earnings next week, which could impact market sentiment further.