Episodes
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In this week’s market sense check we cover what’s affecting the market in short-term, the mid-term and what may unravel in the long term.
Topics Covered:
Fed Rate cut speculation heats upMarket signals in response The resilience of small companies Get access to the charts: www.investsense.com.au/industry-articles/fed-debates-rate-cut-amid-mixed-economic-signals
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In this week’s market sense check we cover what’s affecting the market in short-term, the mid-term and what may unravel in the long term.
Topics Covered:
An overview of market performance in AugustNasdaq’s sharp drop and tech sector concernsWeak U.S. job growth and its market implicationsActive manager underperformance and key factors driving itLong-term economic and market themes to watch for the next decadeGet access to the charts: www.investsense.com.au/industry-articles/cooling-job-growth-falling-yields-and-market-volatility
Join the InvestSense Community to receive weekly insights from our investment team: https://www.investsense.com.au/investsense-insights -
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This past week saw a mix of economic data and corporate earnings that drove market sentiment.
In brief:
Mixed Results from Australia's August Earnings Season: While the banking sector showed strong performance despite some scepticism about valuations, mining and energy companies faced significant challenges. Meanwhile, consumer spending remained robust in some areas, but there were signs of caution in the services sector, highlighting the uneven economic landscape.
Nvidia's Earnings Disappoint Despite Strong Results: Nvidia's earnings report, one of the most anticipated this season, exceeded expectations by doubling sales and earnings from a year ago. However, the stock still saw a sell-off, reflecting investor concerns about the sustainability of AI infrastructure spending.
Global Economic Signals and the Upcoming August Jobs Report: With signs of both resilience and slowdown in global markets, all eyes are on this Friday's August jobs report. It could be pivotal in determining the Federal Reserve's policy direction and the market's trajectory for the rest of the year. Investors are hoping for a "Goldilocks" reading that indicates a gradual labour market slowdown without signalling an imminent downturn.
Get access to the charts: www.investsense.com.au/industry-articles/august-reporting-season-the-misses-and-beats
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Financial Markets Grapple with Implications of Fed's Shift in SignalsLast week saw financial markets grapple with the implications of Fed Chair Jerome Powell's speech at the Jackson Hole symposium. In brief:
Federal Reserve Signals Rate Cuts: Fed Chair Jerome Powell stated "the time has come for policy to adjust," indicating the Fed is prepared to begin cutting interest rates. This dovish shift sparked a rally in equities and a decline in bond yields on Friday.
Mixed Economic Data: U.S. durable goods orders rebounded strongly in July, up 9.9% month-on-month, but this was largely due to volatile aircraft orders. Core capital goods shipments, a key indicator of business investment, fell 0.4%, suggesting potential weakness in Q3 GDP.
Global Growth Concerns: The German Ifo business climate index fell to 86.6 in August, with the current conditions reading at its weakest level since August 2020, highlighting ongoing concerns about European economic growth.
Get access to the chart: www.investsense.com.au/industry-articles/financial-markets-grapple-with-implications-of-feds-shift-in-signals
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In brief:
Strong Global Equity Performance: Global equity markets posted their best performance in nine months, driven by hopes of rate cuts from the Federal Reserve and encouraging economic reports such as lower-than-expected inflation and strong retail sales.
Fed Rate Cut Expectations: Recent economic data has caused investors to reconsider the likelihood of a 50bps cut at the Fed's next meeting in September. While a 25bps reduction remains highly likely, the probability of a larger cut has decreased from 50% to approximately 25% over the past week.
Australian Corporate Earnings Overview: The Australian reporting season has provided mixed insights into the economic landscape, with a balanced number of companies exceeding, meeting, or falling short of modest expectations. Notably, AMP and Telstra Group exceeded expectations while Suncorp Group fell short, highlighting ongoing challenges within its operations.
Get access to the chart: www.investsense.com.au/industry-articles/equity-markets-rally-on-rate-cut-hopes-and-positive-economic-data
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The past week in markets was significantly calmer, with the S&P 500 reporting a 10.8% year-over-year earnings growth—its highest since Q4 2021—the focus now shifts to the Australian reporting season.
In brief:
US Earnings Performance: The S&P 500's year-over-year earnings growth was driven by strong results in the Utilities and Information Technology sectors, highlighting corporate strength despite high interest rates and political challenges.
Inflation Trends and Federal Reserve Actions: Recent US Producer Price Index (PPI) data came in below expectations, strengthening the case for the Federal Reserve to consider rate cuts as early as September. This anticipation builds as markets await the upcoming US Consumer Price Index (CPI) release, which will play a critical role in shaping the Fed's rate path in the face of fluctuating economic signals.
Australian Market Outlook: The onset of Australia's earnings season reveals a modest decline in profits among the top 200 listed companies, with an expected drop of 2-3% for the 2023-24 financial year. This downturn marks the end of unusually high profits seen during the pandemic. Current economic pressures are particularly evident in retail, with companies like JB Hi-Fi and Myer revealing the impacts of constrained consumer spending.
Get access to the chart: www.investsense.com.au/industry-articles/us-market-settle-as-australian-reporting-takes-centre-stage
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Several unexpected events during the first week of August led to big moves in the markets
In brief:
Surprise Interest Rate Rise: The Bank of Japan started raising rates in an unexpected move after keeping them very low for a long timeWeak Jobs Report: An unexpected US jobs report on Friday triggered the ‘Sahm Rule’ rule, seen as an indicator of potential recession when the unemployment rate rises >0.5% in a 3-month periodEquity markets reacted negatively: On Monday, markets plunged, especially in Japan which at one point was down 20% in local currency terms, in what appeared to be an unwind of the yen carry trade.Find out what happened, why and what it means now.
Get access to the chart: www.investsense.com.au/industry-articles/market-turbulence-following-weak-u-s-jobs-report-and-surprise-rate-hikes-in-japan
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Last week saw markets treading cautiously as investors digested a flurry of earnings reports and economic data.
In Brief:
Shift in Market Dynamics: The Russell 2000 index of small-cap stocks rose nearly 3% last week, outperforming major indexes like the Nasdaq and S&P 500, which struggled to stay positive. This performance continues to fuel discussions about a potential rotation from mega-cap tech stocks to smaller companies.
Tech Sector Volatility: Despite strong earnings from tech giants Alphabet and Tesla, their forward guidance raised investor concerns. Notably, Tesla's shares fell by 12% following news of a delayed robo-taxi rollout, contributing to a broader tech sell-off.
Contrasting Global Economies: The US economy showed strong growth, expanding by 2.8% in Q2, which surpassed expectations and eased some recession concerns. In contrast, Europe displayed weaker economic signs, particularly in Germany where both manufacturing and services are contracting. The Bank of Canada cut rates as expected and speculation is mounting that the Fed may follow suit in September.
Read the summ: www.investsense.com.au/industry-articles/a-week-of-mixed-market-movements-small-caps-rise-as-tech-wavers
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This past week has shown broad declines across major asset classes, challenging the optimism around peaking inflation and potential central bank easing.
In brief:
U.S. Economic Indicators: The S&P 500 and Nasdaq hit record highs due to cooling inflation expectations and possible Federal Reserve rate cuts. However, following news that the Biden administration is considering tighter restrictions on semiconductor exports to China, the Nasdaq faced a sharp decline, dropping 3.7%.
Global Market trends: Despite easing inflation, economic data suggests a slowing global economy. Major stock indices around the world experienced notable declines; Japan's Nikkei 225 slumped by 2.71%, while European stocks, including the Euro Stoxx 50, German DAX, and French CAC 40, dropped by 0.7% to 1.1%. Emerging market stocks were flat.
Australian Market Trends Downward: The S&P/ASX 300 ended the week down by 1.40%. Energy stocks took the hardest hit, dropping by 6.45%. The S&P/ASX Small Ordinaries, representing smaller cap stocks, fell by 2.71%.
Read the article: www.investsense.com.au/industry-articles/a-week-of-contrasts-in-global-markets-from-record-highs-to-renewed-growth-concerns
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In brief:
Falling US Inflation Sparks Hope: Last week's US CPI report revealed a quicker than expected drop in inflation, raising hopes for potential early Federal Reserve rate cuts, leading to a significant drop in US bond yields.
Global Political Developments Impact Markets: In France, Marine Le Pen's party did not secure a majority, easing concerns about a radical shift in politics, while the UK's better than expected GDP growth in May provided a slight economic uplift amidst ongoing fiscal policy discussions.
Anticipation of Global Rate Cuts: With the US possibly heading for rate cuts following encouraging inflation data, other global central banks, including the Bank of Canada and the Reserve Bank of New Zealand, signalled possible easing.
Read the update:https://www.investsense.com.au/industry-articles/us-inflation-decline-triggers-market-shift
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In brief:
Bond Market Fluctuations: Global bond yields initially surged, driven by rising U.S. debt concerns and political tensions in France. However, yields later declined following dovish comments from Fed Chair Jerome Powell, who expressed comfort with ongoing disinflationary trends in the U.S., despite stronger-than-expected job opening data suggesting a still tight labour market.
Central Bank Directions: Mixed economic indicators such as the U.S. ISM Services index falling into contraction sparked market optimism about potential rate cuts. The Reserve Bank of Australia remains in wait-and-see mode amid confusing signals on consumption and inflation. The Bank of Canada is now seen as more likely to cut rates in July after unemployment rose.
Political Events Impacting Markets: The UK general election and France's legislative elections were focal points, with the UK's Labour party gaining a historic majority, expected to ensure fiscal continuity. France saw a fragmented outcome that prevented any single party from gaining a majority, thereby reducing the risk of radical policy changes.
Read the report:www.investsense.com.au/industry-articles/delicately-balanced-markets-react-to-mixed-economic-signals-and-political-uncertainty
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Interest Rate Trends and Inflation Pressures: The financial year saw sharp rises in interest rates, particularly noticeable at the end of June 2024. Australia and Canada both reported unexpected increases in inflation, raising speculations about further rate hikes by central banks.
Impact of U.S. Presidential Debate on Markets: The first debate between Donald Trump and Joe Biden introduced political uncertainties that rattled markets, influencing bond prices and increasing the likelihood of a populist fiscal policy shift in the U.S., which could involve lower taxes and higher government spending. Performance Divergence Across
Sectors and Asset Classes: Throughout the financial year, market performance varied significantly across sectors and asset classes. Tech and semiconductor stocks like NVIDIA drove the Nasdaq up by 30%, while traditional sectors and value stocks experienced modest gains.
Get access to the charts: www.investsense.com.au/industry-articles/markets-end-financial-year-on-a-turbulent-note
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The third week of June 2024 brought a mix of market movements, with tech stocks faltering in the US while Europe grappled with signs of economic slowdown. Despite these headwinds, global small caps showed resilience, and the UK and Japan emerged as top performers.
Get access to the charts: www.investsense.com.au/industry-articles/nvidias-volatile-week-divergent-global-performance
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In brief:
Global Market Trends: This past week, we observed a significant divergence in global markets. While the tech-heavy Nasdaq saw an increase of over 3%, European markets experienced declines amid political uncertainties following the French primary elections. This shift in market sentiment was influenced by election results which could lead to increased fiscal spending and potentially destabilise the region's economy.
Tech's Impact on US Market Performance: The influence of major tech stocks like NVIDIA, Apple, and Microsoft continues to be substantial, driving the S&P 500's performance significantly in recent weeks. Excluding technology, the rest of the market was largely flat to down, potentially indicating a significant divide in the U.S. economy.
U.S. Inflation Signals: In the U.S., recent CPI data suggested that inflation might be moderating more than initially expected, possibly indicating a return to disinflationary trends. However, it remains to be seen whether this is a sign of a strengthening economy or early indicators of potential economic downturns.
Get access to the charts: www.investsense.com.au/industry-articles/another-good-inflation-and-bad-politics-week-for-markets
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Last week in markets, we saw tech gains and conflicting economic signals leading to volatile conditions. We dive into what that means for interest rates, inflation and potential economic growth.
In brief:
Robust Tech Sector Performance: Led by giants like Nvidia and Apple, the technology sector has driven significant gains in the U.S. markets, with the Nasdaq hitting new highs and Nvidia’s market value soaring past $3 trillion
Mixed Economic Indicators: While the U.S. economy added 272,000 jobs last month, indicating strength, other indicators paint a more complex picture. The manufacturing index dropped to 47.2, indicating contraction, and job openings decreased to a three-year low of 8.1 million, highlighting potential challenges in the labour market.
Central Bank Movements: Upcoming central bank meetings and CPI reports in the U.S. and Australia will be critical in shaping future monetary policies amidst persistent inflation. Both the Fed & RBA are expected to maintain current interest rate levels.
Get access to the charts: www.investsense.com.au/industry-articles/tech-gains-and-conflicting-economic-signals-drive-a-volatile-market
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Key highlights:
Mixed Australian Market Performance: The S&P/ASX 200 index saw a modest rebound after earlier losses, closing the week down by just 0.3%. This minor downturn is attributed to growing inflation concerns, dampening expectations for near-term interest rate cuts by the RBA.
Australian Sector Performance: Specific sectors experienced varied impacts to the growing inflation concerns: industrials declined by 1.5%, consumer discretionary by 1.2%, and financials by 0.9%. In contrast, the healthcare sector showed strength, with Telix Pharmaceuticals and Pro Medicus gaining 3.2% and 2.8%, respectively, supported by strong quarterly results.
Global and US Market Dynamics: Globally, markets saw modest declines, with the MSCI World ex-Australia Index falling 0.5% and the MSCI Emerging Markets Index dropping 3.6%. In the US, Nvidia continued to drive Nasdaq's volatility, playing a significant role amid broader industry concerns highlighted by Salesforce’s disappointing performance.
Get access to the charts: www.investsense.com.au/industry-articles/fluctuating-global-markets-and-mixed-economic-signals
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Global financial markets experienced mixed performance last week, with equities posting gains in developed markets while emerging markets and defensive sectors lagged. The ongoing tug-of-war between resilient economic data and persistent inflation concerns continued to drive sentiment.
Get access to the charts: https://www.investsense.com.au/industry-articles/nvidia-shines-amid-persistent-inflation-concerns-in-a-mixed-week-for-global-markets
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Key Highlights:
Market Performance: After a slow start, the S&P/ASX 200 index climbed by 0.84%, closing at 7,814. This rise was buoyed by slowing wage growth in Australia and easing US inflation, which have heightened expectations of potential rate cuts.
The 'Cost of Living' Budget: The federal budget introduced 'cost of living' measures, which, while aimed at boosting consumer spending, could potentially add to inflation pressures. These policies present a complex scenario for the RBA’s future monetary decisions.
Sector and Corporate Highlights: Significant gains were observed in the REITs (+3.9%) and tech (+3.1%) sectors. Aristocrat Leisure notably surged 12% following strong earnings reports, contrasting sharply with the underperforming energy sector.
Get access to the charts: www.investsense.com.au/industry-articles/asx-closes-higher-as-cooling-us-inflation-fuels-anticipation-of-rate-cuts
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Global markets continued their positive momentum last week, largely reversing the pullback experienced in April.
Key Highlights:Market Performance: Europe emerged as the best performer, with the UK showing strong gains. Japan was a bit soft, while Australia saw the ASX 300 gain 1.8%. The US extended its rally, driven by strong earnings reports.Sector Performance: The real estate sector was a standout, with Australian A-REITs up 2.3% for the week. Global REITs returned 1.4%, and global infrastructure gained an impressive 2.1%.Bond Markets: Australian 10-year yields fell initially but have since risen, while US 10-year Treasury yields settled at 4.448%.
Get access to the charts: www.investsense.com.au/industry-articles/positive-momentum-continues-amid-mixed-signals
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