Focus: Why bother investing outside the US?
The sheer dominance of US equities, at 58% of global markets vs only 8% of listed companies is remarkable, and puts a big focus on diversifying internationally, for a broader opportunity set, returns, lower valuations, and diversification. US equities have never been the best performing major market in any recent year, despite their very strong performance. International investing carries specific risks, from currency to corporate governance, and macro risks. See @GlobalETF or @AsianDragons for the long term.
Growth ‘scare’ intensifies and goes global
Global equities rose 0.9% last week, even as GDP growth fears rose, US bond yields plunged, and China resumed its tech sector crackdown. Real estate and consumer discretionary led performance, whilst energy lagged. The market’s growth ‘scare’ intensified as virus variants picked up and we saw pockets of lower growth momentum, after very strong YTD performance. We see this as an opportunity, with growth still robust, credit markets secure, and reassurance coming from Q2 earnings and company guidance.
Delta variant virus fears focused on Asia
A more transmissible ‘Delta’ variant is reversing the sharp decline in global cases, driving new restrictions — no spectators at Tokyo Olympics — and feeding worries about the global growth recovery with only 25% the world vaccinated. However, vaccinated countries, like the US and EU, are seeing few hospitalizations, with the global risk focused on unvaccinated Asia.
Looking at broad space opportunities
Virgin Galactic (SPCE) first full mission launched the space travel era, and focused attention on the fast growing $400bn space market, from rockets to satellite communications and imagery, that has driven many spin-off technologies from camera phones to athletic soles. Other options include ETFs such as ARKX and ITA.
Crypto-asset performance stabilizing
Crypto prices have been stable despite other assets volatility, highlighting its low correlation benefits. Cardano (ADA) saw more institutional interest, and Visa (V) announced a major boost to crypto means-of-exchange. DeFi Aave (AAVE) led larger coin performance last week.
Commodities not all about oil
Oil hogged the headlines after OPEC+ meeting collapse but industrial metals held up well, despite growth ‘scare’, and gold had a rare good week as bond yields fell further.
The week ahead: Q2 earnings kick off
1) JP Morgan (JPM) starts the global Q2 earnings season (Tue). We see upside surprises to help drive the market. US EPS forecast +65% yoy, and Europe +105%. 2) Look at US inflation, with some stability at May’s 5% yoy ‘peak’ level. 3) China in focus with Q2 GDP seen +1.2% qoq, alongside July data, as authorities surprised by introducing more policy support needed.
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.