Category: Newsletter

US October jobs data came in well below expectations, but analysts attributed the slowdown to one-off events. Market remains convinced about a 25 bp cut by the FOMC on November 7th, while concerns about higher inflation and debt pushed 10y US Treasury yields higher. September corporate earnings were generally positive, but market reaction was mixed due to concerns around high AI spends.

Dear Mr. Investor,
 
US stocks continued to hit new all-time highs, with the S&P 500 closing above 5,800 for the first time. Consumer prices for September came in hotter than expected, and the market is now pricing in an 89% probability of a 25 basis point reduction in November. In corporate news, Tesla’s stock fell over 8% amid disappointment regarding its robotaxi rollout, while JPMorgan Chase reported strong net interest income, investment and trading revenue.
 
Please find enclosed our weekly newsletter.
 
Regards,
Asas Capital Team

In September, US nonfarm payrolls surged by 254,000, exceeding expectations, while the unemployment rate fell to 4.1%, leading to expectations of a more gradual cut in interest rates by the Fed. Meanwhile, geopolitical tensions spiked as Iran launched missile attacks on Israel, heightening fears of a broader Middle East conflict. Global markets, including European, Indian, and Gulf stock exchanges, were impacted by rising oil prices and economic uncertainty

Stocks ended the week on a high, boosted by a favorable inflation report and strong economic growth data. Tech stocks saw mixed results as Nvidia faced some setbacks, while Micron and Intel rose on positive earnings and funding news. Beijing introduced a plethora of measures to stimulate its economy, lifting mainland stocks. Oil prices dropped following Saudi Arabia’s decision to increase output.

Following a 50 basis point rate cut, the S&P 500 hit record highs, and Gold rallied to all-time highs.

At current levels, the index’s valuation of 21 times forward earnings is significantly higher than the long-term average. However, near-term momentum is bullish for markets

Stocks surged despite higher than expected inflation data, driven in part by Nvidia’s 16% rise due to strong AI chip demand. Markets are split on whether the Federal Reserve will cut rates by 25 or 50 basis points. Meanwhile, gold hit a historic high of $2,600/oz. The ECB also cut interest rates for the second time this year.

US stocks concluded a volatile month in a positive mood, buoyed by core PCE data suggesting potential interest rate cuts in September and beyond. Retailers announced weak sales guidance for the year as they continue to see a shift in spending from discretionary items to essentials. Nvidia’s shares initially dropped over 8% despite strong earnings before recovering as they see a slowdown in sales growth and reduction in margins.

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.

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.

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.