We are pleased to count you among our Market Compass readers. The monthly publication provides interesting insights and suggestions regarding the current market environment.
Explore the latest trends and strategic insights in the July 2024 edition of the “Market Compass.”
This issue provides a comprehensive overview of the shifting dynamics in the global financial landscape, encapsulating major movements from Wall Street to the heart of Europe.
Delve into the current state of equity markets, where Apple and Nvidia have been the standout performers, driving significant momentum. Apple’s shares surged by 9.6% following the announcement of its AI initiative “Apple Intelligence” and a partnership with OpenAI. Nvidia, briefly surpassing Microsoft as the world’s largest company, saw its share price rise by 12.7%, marking a 150% year-to-date performance. Consequently, the Nasdaq-100 Index rose by 6.0%, and the S&P 500 Index gained 3.6% in June. However, European markets did not benefit from this positive trend, with the EuroStoxx 50 falling by -1.7% and the Swiss SMI index remaining largely unchanged.
In our earnings season coverage, discover how corporate fundamentals are gaining importance as Q2 2024 draws to a close. Analysts forecast year-on-year earnings growth of 8.8% for the US S&P 500, the highest level since Q1 2022. Despite concerns over high valuations, it’s crucial to note that the technology sector’s increasing weight in the index justifies higher valuations due to lower capital intensity and higher free cash flows.
This edition also highlights ongoing geopolitical tensions, particularly between the U.S. and China. President Biden’s announcement of new import tariffs on Chinese goods has sparked concerns, but the immediate economic impact remains minimal. However, this evolving trade conflict adds an element of uncertainty to the market outlook.
Strategic positioning updates reflect adjustments in asset allocations amidst evolving market conditions. The current decline in market breadth, driven primarily by a small number of stocks like Nvidia, signals caution against overly aggressive investor positioning. High interest rates and weaker seasonality in the summer months further support this cautious approach.
Stay informed with our detailed market outlook, which anticipates a phase of consolidation in equity markets through the summer. We expect balanced risk/return scenarios with potential challenges from persistent inflation and interest rates. The Federal Reserve’s potential rate cuts in the foreseeable future, alongside the European Central Bank’s recent rate reductions, are critical factors to watch.
As part of our tactical positioning within our balanced mandates, we maintain an overweight position in fixed income, particularly favoring high-quality corporate bonds. The bond market is expected to benefit from anticipated rate cuts, enhancing the risk-return relationship. Despite the overall market likely remaining range-bound, we see selective opportunities in communication services and information technology sectors offering promising entry points.
Download the full PDF of our July 2024 Market Compass for an in-depth analysis and forward-looking guidance on navigating these turbulent times in financial markets.
Do not hesitate to contact us with any questions about the topics discussed. We are happy to assist you with our expertise.
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