Tag: Market Update

Macro Versus Company Returns; What’s Driving The Chaotic Markets?

The roller coaster ride continued again this week on the markets, as traders were dazzled by strong corporate results from NVIDA underscoring the power of the AI super cycle on one hand, and by really mixed data signals on the other thanks to a raft of better-than-expected purchasing managers’ index (PMI) data from across the northern hemisphere, while rates higher for longer came back into focus, with hope of rate cuts being squeezed further.

The economic data points to a strong economy and inflation that won’t go away. Couple yesterday’s PMI data with a slew of Fed speakers this week and the Fed minutes, which suggested the central bank could keep rates high for longer than expected, as well as a string of warnings on inflation from Federal Reserve officials, investors have realized that either the Fed has no idea what it is doing when it comes to inflation and the path of monetary policy or investors are starting to sense that the Fed rate hiking cycle may not be over. Financial markets now fully price just one quarter-point interest rate cut from the Federal Reserve this year – compared to the six built into futures prices at the start of 2024.

European equities have traded lower at the end of the week, tracking weakness in Asia and also Wall Street as increasing anxiety over sticky U.S. inflation and high interest rates battered sentiment towards risk-driven assets.

China was hit with a wave of negative sentiment this week as a trade war with the U.S. appeared to have escalated.

A Wall Street sell-off rattled Australian capital markets on Friday as bond yields rose and investors trimmed rate cut bets, sending technology, retail and banking sector shares sharply lower.

So standing back, signs of the consensus belief in a soft landing, interest rate cuts and resilient growth in earnings are everywhere. There’s the grind higher in share market indices despite rich valuations and non-existent risk premiums (the difference between earnings yields and bond yields).

It’s worth remembering the words of an eternal bull in the late, great Charlie Munger, who urged investors to “invert, always invert”. “Turn a situation or problem upside down. Look at it backwards. What happens if all our plans go wrong? Where don’t we want to go, and how do you get there?”

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

The Bulls Are Running Again; For Now…

This is our weekly market update. After recent wobbles on concerns of higher rates for longer, the Bulls have been stomping through the markets this week. Data dependency is a marvellous thing because each shiny new data point has the potential to swing the market violently. Some might well be detecting signs of weakness below the surface, suggesting further reversals ahead.

The blue-chip Dow Jones Industrial Average passed the 40,000 level for the first time ever earlier in the week, and record highs have also been seen by major indices in Europe and Asia as investors took advantage of expectations of lower interest rates globally. These markets have remained relatively resilient even as U.S. macro data have shown signs of softening, with the PMI and ISM surveys declining in April, labour-market data worsening, consumer confidence dropping and the housing market deteriorating again.

The bulls of the ASX are running again this week in a classic “bad news is good news” rally. Lingering concerns that sticky inflation could force the Federal Reserve or the Reserve Bank to raise rates have suddenly been extinguished. For all that worry about higher-for-longer rates exposing cracks in the local economy – the weakening consumer spending we’re seeing, the rising corporate insolvencies, weakening consumer and business sentiment – the ASX 200 has quietly added 4 per cent within two weeks, and is now up 3.3 per cent this year. Since October 2022, it has gained 22 per cent.

Never mind that valuations look stretched and equity risk premiums on both sides of the Pacific (the difference between the equity market’s earnings yield and the 10-year bond yields) are almost non-existent. Local investors continue to plough into their market darlings in the firm belief that rate cuts are coming.

The latest edition of our finance and property news digest with a distinctively Australian flavour.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
The Bulls Are Running Again; For Now…
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The Bulls Are Running Again; For Now…

This is our weekly market update. After recent wobbles on concerns of higher rates for longer, the Bulls have been stomping through the markets this week. Data dependency is a marvellous thing because each shiny new data point has the potential to swing the market violently. Some might well be detecting signs of weakness below the surface, suggesting further reversals ahead.

The blue-chip Dow Jones Industrial Average passed the 40,000 level for the first time ever earlier in the week, and record highs have also been seen by major indices in Europe and Asia as investors took advantage of expectations of lower interest rates globally. These markets have remained relatively resilient even as U.S. macro data have shown signs of softening, with the PMI and ISM surveys declining in April, labour-market data worsening, consumer confidence dropping and the housing market deteriorating again.

The bulls of the ASX are running again this week in a classic “bad news is good news” rally. Lingering concerns that sticky inflation could force the Federal Reserve or the Reserve Bank to raise rates have suddenly been extinguished. For all that worry about higher-for-longer rates exposing cracks in the local economy – the weakening consumer spending we’re seeing, the rising corporate insolvencies, weakening consumer and business sentiment – the ASX 200 has quietly added 4 per cent within two weeks, and is now up 3.3 per cent this year. Since October 2022, it has gained 22 per cent.

Never mind that valuations look stretched and equity risk premiums on both sides of the Pacific (the difference between the equity market’s earnings yield and the 10-year bond yields) are almost non-existent. Local investors continue to plough into their market darlings in the firm belief that rate cuts are coming.

The latest edition of our finance and property news digest with a distinctively Australian flavour.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Into The Storm: What Next?

This is my weekly market update, starting in the US, crossing to Europe, then Asia and ending in Australia plus commodities and crypto.

An unusually strong solar storm hit the Earth overnight producing northern lights in the US and Europe and southern lights across Australia, including Queensland. Bright auroras were visible at unusually low latitudes. The G5 geomagnetic conditions could potentially disrupt power and communications with warnings to governments and critical infrastructure operators about the potential impacts on infrastructure and essential services.

This reminded me that things can be unpredictable, and markets risk surprises in the weeks and months ahead, as Central Banks, who created the massive inflation storm by their own actions, try to reverse the effects through higher for longer interest rates. Meantime Government debt continues to rise, together with the costs of debt servicing, and many ordinary households are caught in the crossfire. Yet financial markets are still hopeful.

On Friday shares in New York were modestly higher, with techs somewhat lagging. But all three indexes were up for the week with the blue-chip Dow nabbing its largest Friday-to-Friday percentage advance since mid-December. The benchmark S&P 500 index is up over 9% for the year, up near its late-March record high, following a 5% pullback that occurred last month.

The question of how independently will other Central Banks move their base rates ahead of the FED comes more into view. More broadly is the U.S. exceptionalism trade fading?

And what does the demise of Perpetual, like the fall of AMP before it, also tells us about the changing nature of Australia’s financial services sector: the growing scale and power of the superannuation sector; the rise and rise of passive investing and private capital; and the global struggle to make the listed funds management model work?

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Into The Storm: What Next?
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Into The Storm: What Next?

This is my weekly market update, starting in the US, crossing to Europe, then Asia and ending in Australia plus commodities and crypto.

An unusually strong solar storm hit the Earth overnight producing northern lights in the US and Europe and southern lights across Australia, including Queensland. Bright auroras were visible at unusually low latitudes. The G5 geomagnetic conditions could potentially disrupt power and communications with warnings to governments and critical infrastructure operators about the potential impacts on infrastructure and essential services.

This reminded me that things can be unpredictable, and markets risk surprises in the weeks and months ahead, as Central Banks, who created the massive inflation storm by their own actions, try to reverse the effects through higher for longer interest rates. Meantime Government debt continues to rise, together with the costs of debt servicing, and many ordinary households are caught in the crossfire. Yet financial markets are still hopeful.

On Friday shares in New York were modestly higher, with techs somewhat lagging. But all three indexes were up for the week with the blue-chip Dow nabbing its largest Friday-to-Friday percentage advance since mid-December. The benchmark S&P 500 index is up over 9% for the year, up near its late-March record high, following a 5% pullback that occurred last month.

The question of how independently will other Central Banks move their base rates ahead of the FED comes more into view. More broadly is the U.S. exceptionalism trade fading?

And what does the demise of Perpetual, like the fall of AMP before it, also tells us about the changing nature of Australia’s financial services sector: the growing scale and power of the superannuation sector; the rise and rise of passive investing and private capital; and the global struggle to make the listed funds management model work?

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Are Central Bankers Becoming Political Animals?

This is our latest weekly market update.

Another wild week on the markets, driven by conflicting data, and a reactive FED, who has effectively given up on forward guidance, and who does not know where rates will go. But despite Powell’s protests to the contrary, some are suggesting Central Bankers are being swayed by political considerations from driving rates higher to quash inflation.

Apart from more strong big tech results this week, two events shaped the week. It started with fears of higher rates and inflation, driven by hot economic data, but turned after the FED held rates, and ruled out rate hikes, waiting for more data. Stubbornly high readings on inflation this year pushed Federal Reserve Chair Jerome Powell to say on Wednesday that it will likely take “longer than previously expected” to get enough confidence about inflation to cut interest rates.

But then in a “bad news is good news” swing, the Friday jobs report came is softer than expected in April, a sign that persistently high interest rates may be starting to take a bigger toll on the world’s largest economy.

In Australia the benchmark S&P/ASX 200 rose 0.55 per cent, to 7629 points to finish the week 0.7 per cent higher. The central bank on Tuesday is widely expected to keep the cash rate at a 12-year high of 4.35 per cent, but it may also reintroduce a soft tightening bias following last week’s hotter-than-expected inflation report.

But at the end of another volatile and rudderless week, markets remain on edge, waiting for the next big shiny bit of news – of course big players benefit from these changes in sentiment, but ordinary investors will be perhaps rightly more cautious. Expect more rapid changes in trajectory in the weeks ahead, as data will continue to confuse. Meantime, the credibility of Central Bankers continues in my eyes to diminish, even as more ordinary households are being crushed. And more on that subject in my live stream on Tuesday.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Are Central Bankers Becoming Political Animals?
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Are Central Bankers Becoming Political Animals?

This is our latest weekly market update.

Another wild week on the markets, driven by conflicting data, and a reactive FED, who has effectively given up on forward guidance, and who does not know where rates will go. But despite Powell’s protests to the contrary, some are suggesting Central Bankers are being swayed by political considerations from driving rates higher to quash inflation.

Apart from more strong big tech results this week, two events shaped the week. It started with fears of higher rates and inflation, driven by hot economic data, but turned after the FED held rates, and ruled out rate hikes, waiting for more data. Stubbornly high readings on inflation this year pushed Federal Reserve Chair Jerome Powell to say on Wednesday that it will likely take “longer than previously expected” to get enough confidence about inflation to cut interest rates.

But then in a “bad news is good news” swing, the Friday jobs report came is softer than expected in April, a sign that persistently high interest rates may be starting to take a bigger toll on the world’s largest economy.

In Australia the benchmark S&P/ASX 200 rose 0.55 per cent, to 7629 points to finish the week 0.7 per cent higher. The central bank on Tuesday is widely expected to keep the cash rate at a 12-year high of 4.35 per cent, but it may also reintroduce a soft tightening bias following last week’s hotter-than-expected inflation report.

But aT the end of another volatile and rudderless week, markets remain on edge, waiting for the next big shiny bit of news – of course big players benefit from these changes in sentiment, but ordinary investors will be perhaps rightly more cautious. Expect more rapid changes in trajectory in the weeks ahead, as data will continue to confuse. Meantime, the credibility of Central Bankers continues in my eyes to diminish, even as more ordinary households are being crushed. And more on that subject in my live stream on Tuesday.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

The Scent Of Stagflation Hangs Over The Markets!

This is our latest weekly market update, starting in the US, UK, then Europe, Asia and Australia, and also covering Gold. Oil and Crypto. A comprehensive round-up of what is happening!

We are, it seems entering the twilight zone, as the scent of stagflation is spreading, as inflation becomes increasingly sticky, especially in services, while growth slows, leading to increased market volatility and questionable consumer confidence. Hopes of rapid Fed rate cuts have receded following a series of U.S. inflation readings.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
The Scent Of Stagflation Hangs Over The Markets!
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The Scent Of Stagflation Hangs Over The Markets!

This is our latest weekly market update, starting in the US, UK, then Europe, Asia and Australia, and also covering Gold. Oil and Crypto. A comprehensive round-up of what is happening!

We are, it seems entering the twilight zone, as the scent of stagflation is spreading, as inflation becomes increasingly sticky, especially in services, while growth slows, leading to increased market volatility and questionable consumer confidence. Hopes of rapid Fed rate cuts have receded following a series of U.S. inflation readings.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Looking Past Hopium Towards Real Numbers…

The value of stocks are driven partly by momentum, through perhaps we should really call this hopium, as its really investors betting with their gut, and the cold hard realities of financial results. Markets have been leveraged higher by rate cut expectations and the prospects of AI. But when the numbers come in at results time, sometimes hopium goes away. Especially when bond yields take the discount rate higher, (the US 2-year is currently at 4.925 and the 10-year at 4.646) so reducing the future value of earnings.

Australian markets were closed for the ANZAC holiday. We will remember them.

Ahead, Markets were also awaiting more cues on the U.S. economy and interest rates from upcoming data prints. US Gross domestic product data is due later on Thursday, and is expected to show just how resilient the U.S. economy remained in the first quarter.

More closely watched will be PCE price index data- due on Friday. The reading is the Federal Reserve’s preferred inflation gauge, and is likely to factor into the central bank’s plans for interest rates.

As Warren Buffet says, when the tide goes out we can see who is swimming naked. To which I would add, when the tide of hopium goes out, we do indeed see reality below the water line and it may well not be pretty!

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Looking Past Hopium Towards Real Numbers...
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