US Technology Companies Show Continued Resilience

My Image
My Image

Investors were looking for new drivers to determine the direction of markets last week. As the relatively positive news flows from earnings season and the easing of lockdown measures subsided, bearish sentiment returned and major indices ended the week in the red.

The possibility of an additional fiscal package of USD 3 trillion proposed by Democrats in the US suffered a setback as President Trump said this was ‘dead on arrival’. However, in a speech on Wednesday US FED Chair Powell did not exclude further monetary stimulus after declaring there is significant downside risks to
economic growth in the months ahead. Furthermore the US China trade talks which has come under scrutiny in recent weeks was a talking point again; President Trump declared on Fox Business news on Thursday that he had no interest in resuming talks with his Chinese
counterpart and that the US might review its entire relationship with China!

There is less financial market stress now compared to a couple of months ago. The USD Libor – OIS spreads is lower after aggressive FED intervention and equity risk premiums have recovered sharply the FED announced open ended quantitative easing on 23rd March.

Compared to European indices, the US market has performed better due to the outperformance of technology companies (chart above). The Euro Stoxx bank index was at all-time lows last week and a rebound is reliant on support which the European recovery fund
will provide to the south which is exposed to tourism and the north which suffers from a slowdown in global trade.

Factset reports that analyst estimate the S&P500 index will rise to 3,220 in the next 12 months. This would represent a gain of 13% over its closing price of last week. Even if volatility remains elevated and range
bound action is likely in the near term, a good asset allocation could reward investors in the long run.

PWM is a boutique wealth management company in South Africa providing bespoke investment services to affluent individuals

We provide independent, expert advice on local and offshore investment funds, portfolios and structures. We have access to a vast, customizable range of investment options from across the global market. As a result clients benefit by receiving the most appropriate advice and solutions for their varying and specific needs. Our business operates within a highly regulated environment therefore ensuring that the highest professional standards are maintained while keeping the best interests of our clients in mind. For this reason systems have been put in place to ensure full compliance with all regulatory requirements.

Disclaimer: The research report has been prepared for information purposes and does not constitute an offer. While reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and the company accepts no liability whatsoever for any direct or consequential loss, including without limitation any loss of profits, arising from reliance on this report.

18 May 2020

My Image
My Image
My Image

Lower Base Effects Will Be A Tailwind For Growth In 2021

My Image

US Markit Services PMI Indicates A Rebound In Activity

My Image