A good start to the week new records in world stock exchanges. In the center of attention Tokyo, where the run was fueled by a weaker yen, while United States Growth was once again driven by the technology sector, and in particular the semiconductor sector, which established itself as a leading sector. The rally is also due to a A potential rate cut by the Fed, which could be confirmed during today’s speech President Jerome Powell Congress.
Double record in New York and Tokyo
But let’s get to the data. L:on the Tokyo Stock Exchange today’s session was closed by A The Nikkei closed at a new record, rising 2.0% to 41,580.17. and the broader Topix index increased by 0.97% and made 2895.55 points.
The new records follow intra-hour Wall Street records set by the S&P 500 and the Nasdaq, which closed the day up 0.1%, respectively, at 5,572.85 yesterday, while the Nasdaq Composite advanced 0. by 28% to 18,403.74. Instead, the Dow Jones Industrial Average fell 31 points, or 0.08%, to 39,344.79.
In New York, the technology sector dominates again. “Talking about the Big 5 (Apple, Amazon, Nvidia, Google, Microsoft), i.e. companies with a market capitalization of more than 2000 billion to 3000 billion, we reached a total capitalization of approximately 14000 billion dollars. By now the numbers are so high that we no longer realize the strength and power these stocks have compared to others listed in the same indices. To give a small example, if there was a decline of only -2% on these 5 companies at the same time, we would have the same effect as the bankruptcy of AMD, practically 280 billion market capital (Dram market capital) would have. will be destroyed by only one -2%”.
FED tapering expectations are rising
The S&P 500 is coming off its fourth positive week in the past five on optimism that easing inflation and any pockets of weakness in the economy could lead to a rate cut by the Federal Reserve.
The consumer price index for June, which will be published on Thursday, can strengthen those hopes. Meanwhile, last week’s jobs data showed a slight cooling in the employment market, fueling expectations of a rate cut. Although the US economy added more jobs than expected in June, there was also an unexpected increase in the unemployment rate, from 4% to 4.1%.
According to the CME FedWatch Tool, traders currently expect two rate cuts in 2024, with the first in September.
“We believe the fundamental backdrop continues to support equities, driven by strong economic and earnings growth, lower interest rates and increased investment in the AI sector,” UBS strategist Vincent Heaney wrote in a note on Monday.
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What to expect in the next few months? If among analysts, there is, which does not rule out a sharp fall in the indices, in general operators continue to work a possible Fed monetary easing in September which could help boost revenue (starting this week second quarter accounting season ed.), in a context in which the US economy shows signs of slowing down.
“In the current environment, we think it is unlikely that the Fed will be able to fully reverse the global trend of rate cuts, but it is also likely that it will move more slowly than many expect. If the Fed cuts once or twice this year, the overall level of US interest rates will remain historically quite high.” they explained Saira Malik, Chief Investment Officer Anders Persson, Chief Investment Officer, Global Head of Fixed Income di Nuveen, adding That “n:In general, we expect it Market volatility will increase as the US elections approach. but regardless of the outcome, the removal of uncertainty should ultimately calm markets and perhaps stimulate some risk appetite.”
Continuing to analyze portfolio strategy“In general, we prefer to focus on the highest quality segments, gravitating toward sectors and geographies that offer fundamental and valuation advantages. Instead, we have a less positive view of the economy or the areas that are more sensitive to interest rates.”
In the US, large caps are favored over small caps (which tend to underperform when economic growth slows). Although good opportunities are seen in the fields that can benefit from the boom in artificial intelligence.
“At a sector level, our focus areas include energy (strong supply and demand dynamics) and technology (particularly software and semiconductors, which need to be resilient if growth slows).
Outside the United States, they then concluded: “We think Japanese stocks are attractive as Japan is finally emerging from a decade-long fight against deflation. And while the BOJ has been slowly raising interest rates, Japan’s monetary policy remains one of the most accommodative in the world. Even some emerging markets characterized by relative value and earnings improvement look interesting, such as China, which is supported by economic recovery.”
