Focus: The thematic investing boom
Interest in investment themes, rather than traditional country or sector allocations, has boomed and has a long way to go. Performance has been strong, tech disruption rising and ESG issues more important. Thematic investing does have some unique issues, from diversification to volatility. Cleantech and digital transformation are the current focus, and younger investors have taken the lead. Our CopyPortfolios offer many thematic ideas, with top performers led by @ChinaCar, @Driverless, @FashionPortfolio, and @FuturePayments.
Resilient to overdue market volatility
Global markets were hit by some overdue volatility last week, as worries over global growth and the Fed’s imminent tapering decision built. We see markets as well-supported and fears overdone, with the ‘buy-the-dip’ investor response well-justified. Continued upside surprises to company earnings growth one of the key fundamental drivers. A big support here is record corporate profit margins. Many think these are about to fall. We disagree, as cost pressures ease, the tech sector grows, and depressed cyclical sectors recover.
Stock market records falling
The S&P 500 early last week doubled from its March 23, 2020 crisis low, in the fastest start to a bull market in near a century, led by an over 1,600% surge in Moderna (MRNA), followed by Caesars Entertainment (CZR), Tesla (TSLA). S&P 500 seen 49 all-time-highs this year, closing in on long standing record of 77.
Misunderstood retail investors
Retail investors are more important than ever, here to stay, and still misunderstood. Most have been investing over five years, are diversified, and have significant cash positions. This gives us comfort they are well-prepared to stay invested through market volatility and could invest more, as 25% say they would do today.
Cardano rises to third
The broad crypto recovery rally took a breather last week but regained the $2 trillion market cap level. Cardano (ADA) saw more gains, making it to the 3rd largest crypto, ahead of the September Alonzo hard fork that brings it smart contract functionality. It is the most widely held crypto asset on the eToro platform.
Growth fears and USD hurt commodities
The combination of rising global growth fears and the stronger USD drove broad weakness led by oil, copper, and lumber. We remain positive, especially industrial metals, and see weakness as short-lived. We examine the pros and cons of investing directly or via equities.
The week ahead: Taking the growth pulse
1) Timely global purchasing manager index (PMI) growth data (Mon), as GDP rebound fears have risen. 2) Fed meets in Jackson Hole, Wyoming (Thur) to talk about tapering its $120bn/month bond purchases. 3) Q2 earnings from Salesforce, Snowflake, Peloton, JD.com, Xpeng.
Our key views: Remaking the positive case
We see a positive outlook of 1) vaccine rollout and economic re-opening, and 2) still huge policy support, offsetting virus third wave and Fed tightening risks. We favour assets most helped by this growth rebound: equities, commodities, crypto, and value, and are cautious fixed income, USD, defensive equities and China.
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.