Australia
Manufacturing rebound stabilising, but not yet stumbling
Christopher Broadley, Portfolio Manager, said: "The rebound in manufacturing PMIs that began in mid-2023 appears to have levelled out in recent months, with data for the eurozone especially disappointing. While we remain in a stabilising economic regime, it is becoming apparent that the manufacturing sector could benefit from some support. Fortunately, a second rate cut from the ECB appears highly likely for September, with other major central banks expected to ease later in the year†."
Source: Insight Investment & Bloomberg as at 25 July 2024.
Markets react - winners and losers from a potential Trump Presidency
Kristin Qi, Portfolio Analyst said: "Despite November still being some months away, markets are already starting to factor in the likely winners and losers from a potential second Trump presidency. The prospect of a significant hike in import tariffs, especially from goods coming from China, is weighing on Chinese equities. At the same time, Trump’s bias towards de-regulation should benefit banks, but the prospect of reduced subsidies is hurting renewables. There is also a widespread belief that Trump would run even larger fiscal deficits due to tax cuts which would see more supply of US government bonds. The clearest outperformer so far has been US small-cap equities, which have also benefitted from the fall in short-dated US bond yields triggered by the release of soft US CPI data last week†.”
Source: Insight Investment & Bloomberg as at 16 July 2024.
US earnings growth: The next big catalyst for stocks
Jonathan Crone, Portfolio Manager said: “The next big catalyst for stocks will come in the form of the second quarter earnings season. Expectations are for growth of +8.6% yoy in headline S&P 500 EPS, which would mark a sequential improvement from last quarter’s growth rate of +6%. In this week’s chart we highlight that expectations are for a broadening out in contribution from sectors. It is anticipated that earnings from tech heavy sectors will moderate slightly from the lofty levels seen in the past few quarters, but that some of the negative drag from cyclical sectors will pick up the slack†.”
Source: Insight Investment & Bloomberg as at 11 July 2024.
Equity rally narrows in 2nd quarter
Steve Waddington, co-deputy head, multi-asset strategy team said: “Global equities rose in Q2, but this was mostly driven by only two sectors (Information Technology and Communication Services). In fact, the percentage of companies in the index whose price is above their 100-day moving average has fallen from 80% to just above 50% in that time frame. The forthcoming earnings season will give a sense of whether the index laggards will be able to pick up some of the slack†."
Source: Insight Investment & Bloomberg as at 30 June 2024.
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