Date published - 2024-07-02

Last week, the US markets closed softer, with the S&P 500 and Dow Jones Industrial both down 0.1%, despite a strong year-to-date gain of almost 15% for the S&P 500 and 4% for the Dow. The tech-heavy NASDAQ posted a weekly gain of 0.2%, bringing its year-to-date increase to 18%.

Nvidia rebounded sharply mid-week but ended down 2.4%. Rivian surged 30% on a joint venture with Volkswagen, while Chipotle fell 2.56% despite a stock split. Nike dropped 22.5% after cutting its financial forecast. US banks were stronger after passing the Federal Reserve’s stress test.

US bond yields rose by 10 basis points. Gold remained range-bound but up 13% year-to-date. Brent crude futures were stable, capping a 10.3% year-to-date gain amid weak US fuel demand and rising inventories.

The news flow this week is dominated by politics globally with news flow on the Government of National Unity in South Africa, an election in the UK, French political upheaval continues and US politics are front and centre following the recent debate between President Biden and former President Trump.

This week, we consider an SA mining stock along with a global biotech and healthsciences play.

Feature Slide -  Sharpe Ratios Across Markets

Sharpe Ratios across multiple markets are useful in considering relative asset allocations and is used in conjunction with our market carousel.

Some SA company highlights last week:

Renergen (-9.4%), Absa (-8.25%), Anglo American (+3.33%), Exxaro (+1.72%), Hyprop (+2.55%), PPC (-13.04%), Prosus (+0.5%), Naspers (-2%)

More detail in the full report.

Economic:

This week, US trade will be disrupted by the Independence Day holiday.

Last week, US economic data showed that PCE inflation decreased to 2.6%, and core PCE inflation also fell to 2.6%, bolstering expectations of a rate cut. The US GDP grew at an annualized rate of 1.4% in Q1 2024, with consumer spending slowing to 1.5%. Personal income rose by 0.5% in May, while personal spending increased by 0.2%. US banks passed stress tests, indicating potential deeper losses in stress scenarios.

In South Africa, the SARB’s Leading Business Cycle Indicator increased by 2.4%, and Consumer Confidence improved to -12 in Q2 2024. South Africa recorded a trade surplus of ZAR 20.1 billion in May, with exports up by 5.7% and imports down by 0.5%.

More detail in our full report.

For the week ahead:

SA: PMI, Vehicle Sales, Inflation expectations

Global: US Independence Day, FOMC minutes, US jobs data, UK Election

Our Market's and Risk view:

Our risk matrix has bounced back to NEUTRAL from FEAR territory over the last two weeks. Momentum is still in EXTREME GREED, while stock price breadth and the number of new 52 week highs remain in EXTREME FEAR. Headline indices remain propped up by fewer (large cap) stocks. The put/call ratio also remains in EXTREME GREED territory. The overall mix lends us to be cautious which has been the right approach over the last few weeks.

(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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