Date published - 2024-05-28
(This is a very shortened version highlighting excerpts of our full report which is available for our paid subscribers).
Last week, the S&P 500 index just barely extended its winning streak (+0.03%) to five weeks, marking its longest stretch of gains since early February. Despite reaching a record high on Tuesday, the index's momentum stalled later in the week. In contrast, the Nasdaq Composite experienced a more substantial gain of 1.4%, thanks in large part to a significant jump in Nvidia’s shares following an impressive quarterly earnings report. The company also announced strong forward guidance, a 10-1 stock split, and a doubling of its quarterly dividend. The Dow Jones was the weekly laggard, falling 2.3%. The overall sectoral performance was largely negative for the week with the headline indices largely helped by the strong performance of tech stocks.
The yield on the US 10-year rebounded from recent lows following stronger than expected US economic data and the release of the FOMC minutes (see Economic section) which suggests higher rates for longer. Brent crude was lower last week on a dampened growth outlook amid higher rates. Unexpectedly high U.S. crude inventories also contributed to the week's price declines. Gold slipped, approaching two-week lows.
This week we consider an SA bank along with a global tech play you probably haven't heard of.
Some SA company highlights last week:
It was a busy week. Some companies getting our attention:
Bidcorp (-4.2%), Tsogo Sun (-3.5%), BHP (-1.2%), Anglo American (-1%), Life Healthcare (+6%), Pick n Pay (+20%), Spear REIT (+6.5%), Southern Sun (+2.7%), Coronation (+5.7%), Transaction Capital (-4.4%), Altron (+6.7%), Astral Foods (+3.3%), Famous Brands (-7.6%), Impala Platinum (-6.2%), Netcare (-1.1%)
More detail in the full report.
Feature Slide - Understanding The Flashpoints for Elections and The Economy and Markets
Political events and elections significantly influence a country's economy, affecting everything from market confidence to government policy decisions. Here’s some key flashpoints to consider regarding political events and elections and the impact on economic landscapes:
Economic:
Globally, market focus was on the US Federal Reserve's FOMC minutes, revealing concerns about persistent inflation and the potential for further rate hikes. US durable goods orders unexpectedly rose by 0.7%, driven by transportation equipment, reducing expectations for a rate cut. In South Africa, CPI decreased to 5.2% in April, but still exceeded the SARB’s target range, suggesting the central bank may hold rates. Japan saw robust trade growth, with exports, particularly motor vehicles, increasing by 15.9%. The UK’s inflation dropped to 2.3%, the lowest since July 2021, but retail sales fell by 2.7% year-on-year. Germany entered a technical recession with a 0.2% annual economic contraction, weighing on the Eurozone economy and contributing to a dovish ECB outlook. Globally, Purchasing Manager’s Index data indicated improving economic growth momentum, with the UK moving back into expansion.
More detail in our full report.
For the week ahead:
US: GDP, Personal Consumption Expenditure Price Index (the Fed’s preferred inflation measure), Housing data
SA: Elections (results only likely after the week's markets have closed), SARB meeting (hold expected), PMI data
Our Market's and Risk view:
It's been a bumpy ride and our risk matrix has moved lower from GREED back to NEUTRAL. Last week, US markets barely ended positive and Stock price breadth was poor, contributing to the easing in the overall risk assessment. The put/call ratio also moved higher signalling higher caution.
(Corporate clients can contact us for more detail on our overall risk matrix).
Our full report unpacks all of this in more detail as well as their implications for the markets.
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