Focus: The retail investor ‘beat’
Retail investors are more important to global equity markets than ever before. Given this, we surveyed 6,000 retail investors across 12 countries to understand how they are investing, and what they are worried about. They see the main risk as inflation, and many are concerned about current equity market levels. Maybe because of this, portfolios are well diversified and include significant cash. Investors are looking to add to commodities and crypto-assets, as well as energy and real estate equity sectors — though tech remains everyone’s favourite.
Earnings the driver for more upside
The S&P 500 has hit new highs, powering through the summer, helped by progress on the $1 trillion infrastructure plan and with inflation coming in less than feared. The most important market driver though remains much-better-than expected company profits. In the US these rose 90% in Q2 versus initial expectations of 65%. We think these positive surprises continue into next year, with further economic momentum and resilience to the virus third wave.
Covid third-wave drives vaccine stocks
Global virus cases are up 75% since mid July. This has driven another leg of vaccine stock outperformance. @Vaccine-Med is +39% this year. Despite this strong performance, valuations are less than the wider market, as profits have surged, offering some cheap ‘insurance’ to those worried about continued virus risks.
Winners and losers from the strong USD
The USD is at a four month high, surprising many. We see this strength gradually easing as global vaccinations increase and economic re-openings build. A weaker USD would add further fuel to the commodity (DJP) and US tech (XLK) rally, and be a relief to hard-pressed emerging markets (EEM), but also a modest negative for the European equity (EZU) rally.
Crypto rebound broadening
Bitcoin (BTC) is up 50% from its mid-July low, and Ethereum (ETH) by two-thirds. The recovery has been broadening with weekly gains led by Ripple (XRP) and Cardano (ADA). Crypto is the best performing asset this year. We see more usage and investor interest, with strong risk-adjusted returns and low correlations.
New kid on the commodity block
Commodities have been resilient to third-wave demand fears and the stronger USD. What unites commodity prices leaders from lithium to coal is the rising importance of environmental drivers. We see a continued rare commodity sweet spot of strong demand and tight supply.
The week ahead: Not a dull August
- China economic data (Mon) to see extra interest given its growing virus upsurge.
- Notes from the last US Fed meeting (Thur) important as ready to start tightening monetary policy.
- Q2 results to end with a bang from heavyweights including Walmart, BHP, and Nvidia.
Written by a team of experienced financial analysts at eToro.
This content is for information and educational purposes only and should not be considered investment advice or an investment recommendation. Past performance is not an indication of future results.