Have investors started shopping already?
This week’s update is written jointly with our Zhang Zhenyi (Head of Data Transformation and Analytics)
Our Investors were right on Fixed Income
In our previous two newsletters, we had discussed about the emergence of buying of Fixed Income, and how the trend continued the following week. Turns out investors were correct, bonds rallied and the Fed called for rate hike of only 75 basis points (compared to the 100 basis points hike that was speculated in early-July).
Coupled with some signs showing that inflation is peaking and hence the slowdown of Fed’s monetary tightening, the trend of Fixed income buying continues (see chart below).
Oil has also nicely broken below the ‘neckline’ show in the previous newsletter, which hopefully would mean that inflation ticks even lower.
Buying seen in Equities (led by Communications and Tech)
With optimistic signs surfacing from data related to inflation and employment, S&P 500 and Nasdaq posed gains for the 4th consecutive week.
While volumes remain low, our data shows clear buying in equities during the second week of August, after some significant selling just the week before. By drilling down into the industry sectors (chart below), we observed Financials being sold last week, while Technology and Communications led Equities into the green this week.
The buying could have been triggered by positive market sentiment and some bottom fishing for beaten up e-Commerce stocks. In addition some analysis about the rising adoption of IoT which poised the Unified Communications Market to register a 21.25% CAGR from 2021–2030 and reach an expected valuation forecast of USD 365.2 Billion may have also helped.
Technology sector has largely recorded earnings above estimates for the 2nd Quarter of 2022, with earnings releases from big tech players like Amazon and Apple showing resilience and stability of their businesses. Led by institutions, investors even bought Technology at the fastest pace since 2008 a trend that is also very clear in our data.
As the rosy picture in the wider market is largely painted with an expectation that the peak in inflation and tightening measures has been reached, some argue that the Fed’s battle is far from over. How will our investors act in the coming weeks remains to be seen
Conclusion (tl;dr)
- Buying trend continues in Fixed Income
- Inflation, employment, and earnings data built investors’ confidence in Equity
- Communications and Technology led Equity gains
