We are seeing another day where stocks are trading in narrow ranges and investors are cautious to make major investments as markets are near record highs or key data is due including US inflation data (PCE) on Thursday and further comments from Fed officials which are likely to further raise expectations for a prolonged rate hike.
The broad European Stoxx 600 index remains near its all-time high with a handful of European large cap stocks with very strong performance – what Goldman Sachs calls “GRANOLAS” stocks (GSK, Roche, ASML, Nestle, Novartis, Novo Nordisk, L'Oreal, LVMH, AstraZeneca, SAP and Sanofi) that have performed extremely well with less volatility than the Magnificent 7, for example, and are also more broadly diversified.
US Treasury yields are showing signs of falling after yesterday's gains – this could further ease pressure on risk assets and also continues to weigh on the USD, which has weakened slightly in recent sessions despite overall high yields and a Fed in no hurry to cut rates.
The cornerstone of the rally since 2023 has been the rise in big tech stocks, particularly chip and AI stocks. Although the valuations and rapid price gains are reminiscent of a bubble similar to the dotcom bubble, for example, the hype around AI is supported by actual massive sales growth. So I don't see a bubble here and instead believe that the very strong tech sector will help other sectors catch up. We also don't see inflated stock prices outside the US (even undervalued), which further reduces the risk of a bubble (to burst).
We also see little movement on the currency markets. The JPY made slight gains after the better-than-expected inflation data, but gave most of them back again. Inflation data from Australia and the Eurozone will also cause more volatility in the coming sessions.
There was more movement in cryptocurrencies. Supported by continued demand for Bitcoin ETFs and another round of buying from MicroStrategy, Bitcoin rose above $57K and posted very strong gains overall in recent sessions. We continue to see Bitcoin & Co on the upswing ahead of the Bitcoin halving in April and good demand for Bitcoin ETFs.
Oil and industrial metal prices stabilized after the recent weakness. China will continue to play the key role here. Investors will also assess further earnings reports – there are many reports due today.
The overall positive earnings season (especially for US companies) continues to provide a tailwind.
If yields continue to fall, we see more room for short-term gains in both equities and gold. The USD will remain sideways, but could get a boost from another hot inflation report on Thursday.
PS: Thanks for the birthday wishes – another year older / hopefully a little wiser – Robert 🎂
👁 ROB'S MARKET OVERVIEW:
February 27, 2024
🌐/🇺🇸 Global Markets ➡️/↗️/➡️ (still overall positive momentum; potentially again slight profit taking in second half of US trading)
Cyclical Stocks ➡️/↗️/➡️
Tech/Growth Stocks ➡️/↗️/➡️
Financial Stocks ↗️/➡️
Defensive Stocks ➡️
Energy Stocks ↘️/➡️
Materials Stocks ↗️/➡️ (rebound after recent losses)
💱 Forex
JPY ↗️/➡️
AUD ↘️/➡️/↗️ (rebounding / additional tailwinds from likely hot CPI)
USD, CHF, CAD ➡️
EUR, GBP ➡️/↘️
⚒ Commodity Markets ↗️/↕️
Oil prices ↕️
Natural Gas prices ↗️/↕️
Metal prices ↗️/➡️ (rebound after recent sharp losses)
Gold ↗️/➡️ (pushing towards $2,040 short-term / benefiting from stabilizing/sliding yields)
⚡️Cryptos ↗️ (likely remaining overall bullish – finding some resistance in the $58.5K – $59.5 range)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)
Your Robert
