Value makes a strong comeback
- Global equities rose +1% last week, taking YTD to +11.7%, as June PMI’s showed strong growth, led by Europe, whilst lower-than-expected US PCE inflation (Fed’s favored measure) eased price rise fears.
- Energy (+7%) and financials (+5%) led the rebound, whilst ‘bond proxy’ utilities and real estate lagged, as yields inched higher. US markets led International. Commodities surged, and the USD stabilized.
- Markets helped by US$1.2 trillion US infrastructure deal signs (but approval has a long way to go) and US bank ‘stress tests’ greenlighted 8–10% cash returns.
- We make case for diversification, with the average stock consistently underperforming equity indices, as a very small number of stocks drive returns. Average S&P 500 stock is +63% last 20-yrs vs index +322%.
Taking stock at mid-year. See more gains to come
- Global markets performed strongly in the first half. With S&P 500 at double an average 6.5% half-year return. Commodities, crypto, and cyclical equities led a broad-based rally, with only fixed income losing.
- We see lower but still positive returns in the second half. Strong GDP growth is allowing markets to adjust to high valuations, but volatility will rise from post pandemic lows as near Fed ‘tapering’. Other key 2H events include German and Japan elections.
Online still growing after surging last year
- Amazon (AMZN) saw muted c6% ‘Prime Day’ sales growth last week, after the 45% pandemic surge last year. Online sales are still expected to grow 14% globally this year (to 19.5% of total sales) after 28% last year.
- Results from Nike and Fedex last week showed some of the cross-currents. Nike (NKE) online sales soared and guidance was raised, but shipper Fedex (FDX) warned of rising labor costs and bottlenecks.
Bitcoin returns dwarfed by altcoins
- Bitcoin price rose +14% YTD, after -47% pullback from peak, but median gain of top-20 coins +170%.
- We see two big drivers of long term bitcoin adoption by the US$250 trillion institutional market: high risk adjusted return and low correlation with other assets.
- Algo, Polygon (MATIC), and BAT are now available on the eToro platform, taking total coins listed to 26.
Commodity rebound ahead of OPEC meeting
- The broad-based Bloomberg commodity index rose 1.6% last week, as China metals stockpile sales less than expected, US made progress on US$1.2 trillion infrastructure plan, and the USD stabilized.
- Oil was the standout performer, +3.3% ahead of the OPEC+ meeting this week. The futures curve is signalling sharply lower prices. But we see this as a counter-intuitive positive, and supporting prices.
The week ahead: More mega IPOs
- US recovery momentum with forward-looking ISM purchasing managers index likely above 60, and payrolls report with +600k new jobs seen (Fri).
- OPEC+ to meet with oil prices at two-year highs. Expect to see only modest 0.5mbpd production increase as seek to meet growing demand (Thu).
- Q2 results from Bed, Bath & Beyond (BBBY) and Micron (MU). Mobile World Congress and Shopify (SHOP) developer conference. China ride-hailing leader Didi (DIDI) c$65bn market cap. IPO (Wed).
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.