Synopsis of the week
- Last week’s equity market sell-off saw US$2.6 trillion wiped off the value of global equities and the Nasdaq, one of the hardest hit indices had its biggest fall since 2011.
- The US President used his Twitter account to target the US Fed labelling them as “crazy” for raising rates. Although a move he did not like, it was a change the markets had fully factored in.
- Over the last two weeks, Sterling has strengthened ahead of next week’s EU summit in Brussels as hopes of a Brexit deal increase.
On Wednesday evening, our Director of Investment Management Alastair McCaig, joined Bloomberg anchor Jonathan Ferro and Ken Veksler, Director of Acumen Management. In this week’s show, they discussed the spike in 10 year US debt yields, the falling US equity markets and current investment strategies.
On Friday night Alastair McCaig, our Head of Investment Management joined Ana Maria Montero on CNN Money Switzerland to review the volatile week equity markets had and discuss what to expect looking forward. The show’s topics ranged from US Fed interest rates, 10 year US debt yields and the International Monetary Funds downgrade of growth expectations.
Looking back at last week, it is difficult to pinpoint any one thing that brought about the sell-off in equity markets. It is more likely a culmination of several smaller issues that has seen markets correct. The US 10 year Debt yields have traded as high as 3.25% and this does offer investors a more realistic alternative to investing in equities. Secondly, we also heard from the International Monetary Fund who downgraded their expectations for global growth over the next twelve months. Thirdly, the US Fed’s comments point towards four rate rises over 2019 rather than just three.
Most investment managers would probably describe themselves as “nervous bulls” and by this I mean: conscious that the fundamental economic and corporate drivers in the US are still positive, while at the same time aware we are much closer to the end of this current Bull run. So far in 2018, we have seen volatility increase and as such market reactions have been considerably more jumpy than in the recent past. With this being the case, both investors and traders will not be quite as enthusiastic to “buy the dip” as they had been before.
This week, we will see an increase in the number of US companies reporting third-quarter figures along with the start of the European reporting season. Continuing with the US banks, we will hear from Bank of America, Morgan Stanley, Goldman Sachs and Bank of New York Mellon. This is the biggest week for Swiss stocks too with Roche, Nestlé & Novartis all reporting. Expectations are we will see this being the third quarterly reporting season in a row where US corporate growth will be over 20%. This quarter, we will hear from companies about the consequences of Trade Wars as negotiations between the US and China continue. It is unlikely these trade restrictions will have started to directly affect business to date and these comments will be warnings ahead of the next set of quarterly figures.
Corporate Data Releases
|Bank of America, Rio Tinto, Schroders
|Johnson & Johnson, Morgan Stanley, Goldman Sachs, IBM, Netflix
|Roche, Danone, Carrefour, Barratt Developments, Pearson, US Bancorp, Alcoa
|Nestle, Novartis, Accor, Pernod Ricard, Unilever, Phillip Morris, American Express, PaypPal, Bank of New York Mellon
London Stock Exchange, InterContinental Hotels, State Street, Honeywell, Procter & Gamble
Economic Data Releases
|Swiss Inflation Data, US Retail Sales & FED Budget Balance
|Chinese Inflation Data, UK Unemployment Rate, EU Trade Balance, German ZEW Economic Sentiment
|UK & EU Inflation Data, US Crude Oil Inventories, FOMC Minutes
|Swiss Trade Balance, UK Retail Sales, EU Economic Summit, US Unemployment Data
Chinese GDP Retail Sales & Unemployment Rate