Archived articleThis is an archived article from 2024 - please note that any content within the article may be out of date.
Market Musings 140724: Global stocks advance broadly
Market Musings 140724: Global stocks advance broadly
Summary
- Nasdaq 100 advances but stutters
- New multi-year highs in Japan Nikkei 225, Korean KOSPI, Indian SENSEX indices
- US inflation lower than expected, raising US rate cut expectations
- Gold hits a new weekly high, threatens to break higher; gold miners rally
- UK mid caps (FTSE 250) continue to rebound post-election, sterling rallies too v USD, EUR
- Euro leaves behind French election uncertainty, back above $1.09
- Political uncertainty seems to have little impact on stock market optimism
Very strong Japanese, Taiwan performance
Nasdaq tech large-caps still advance after a stutter
UK, Europe mid-/small-caps perform strongly
Biotech sector picks up momentum after lagging since 2021
Gold Miners break out of very long-term downtrend, more to come?
Conclusions
- Political uncertainty has triggered little stock market volatility
- Lower US inflation raises US rate cut expectations (in September), driving US bond yields lower, US dollar lower v Euro, Sterling
- UK stocks, sterling catch a bid post election; remain undervalued v global counterparts
- Gold and silver miners should rise further on back of bullish gold, silver momentum. Gold likes US Fed rate cuts
- Biotech is mounting a comeback after weak post-2021 performance
Disclaimer
This is not financial advice. Our content is intended to be used and must be used for information and education purposes only. Please read our disclaimer and terms and conditions to understand our obligations.
65 comments
Feels like you might have quit posting on here, Edmund? But just in case you are reading, wanted to say I for one miss your Sunday musings on the markets.
This last post thread got hijacked by a couple of subscribers more interested in monotonous obnoxious argument than anything closely resembling informative comment on investing in the markets. This whole Stockopedia platform will fail if they are allowed to drown out those with something more positive to contribute.
Hope to see you back!
Hi Edmund,
Thanks for the article, the pictures/charts are worth a thousand words! And thanks for the podcasts as well, they are informative and I like the ongoing discussion around macro trends. It's ideal for a (current) time-poor, long-term investor like me.
https://tinyurl.com/k3v7pxkk
Fwiw, my thoughts:
# I have missed the huge rise in the SP of many tech investments. I have Ben Rogoff's (Polar Capital Technology Trust (LON:PCT)) latest summary to read but I should imagine he is still bullish.
# Can anyone trust the Chinese Communist Party ? In my opinion, no. You only have to look at what they did to the private education sector to understand the value destruction they can inflict overnight. Sadly, a China investment trust or ETF is not for me.
# I have exposure to Sough Korea through Schroder Oriental Income Fund (LON:SOI) which I am reasonably happy with.
# 100% agree on the UK. Edinburgh Investment Trust (LON:EDIN) and Aberforth Smaller Companies Trust (LON:ASL) have been good performers and pay covered dividends. I wish I had bought Rockwood Strategic (LON:RKW) when I heard Richard Staveley at Mello Chiswick late last year. Is it too late to buy now ? Trading on a 6% premium to NAV, I think so. But maybe Oryx International Growth Fund (LON:OIG) (also Harwood Capital) is a good alternative given what Christopher Mills has said around the 4 trust managers in Harwood Capital sharing ideas.
# 100% agree on resources. The SP of BlackRock World Mining Trust (LON:BRWM) has moved all over the place over the last 3 years or so, mainly because of the discount widening and narrowing. But still a good dividend payer. Plus the trust has reduced is exposure to iron ore and increased it's exposure to copper; I think this is a smart move by the Evy Hambro and Olivia Markham. If the discount increases again, I may put more money to work here.
# I understand the demand for water given the increase in the world population. I'm not really an ETF investor but I notice iShares Global Water UCITS ETF USD (Dist) (LON:IH2O) has done well.
# Biotech, I really have no idea! I used to get the monthly updates for International Biotechnology Trust (LON:IBT) but stopped when I realised the dividend is being paid out of capital reserves rather than revenue reserves.
# The Hargreaves Lansdown (LON:HL.) cash savings option is brilliant and allows me to see the yield curve in action :-) It has allowed me to invest cash that I don't want to commit to the market.
SSB
As there seems to be a tendency to take down whole threads and comments on here maybe the people running the site should contact people to talk about it
Personally I meet speak debate about subjects every single day with people face to face and can do it with out getting upset
The trouble with online discussions seems to be that people say things that they wouldn’t say to someone’s face personally am happy to debate face to face
Hi Bullhead.
Yes indeed.
Shutting down discourse is something that doesn't sit well with me at all.
I speak my mind so this is what I'm like face to face I'm afraid.
This post made references to freedoms in the UK, I find it rather ironic that the entire thread is now redacted and essentially unreadable.
"Those Who Sacrifice Liberty For Security Deserve Neither." - BenFranklin
Exactly Alphaflight the things that people don’t want to discuss are the things that have the biggest impact
always best to be yourself as I quoted in post below
“Just because you’re offended doesn’t mean your right “
We have no freedom to stop whatever Labour wants to do in the next 5years even less so now they have done away with the hereditary peers in the lords
Hi bullhead.
"Exactly Alphaflight the things that people don’t want to discuss are the things that have the biggest impact"
Absolutely. There is little point in having a Discuss section if we can't freely discuss topics relevant to investing.
When Stockopedia removed the "thumb down button" I should have seen all of this coming though :-)
- Alphaflight over an out
Yep Alphaflight
As George Orwell said
Freedom is the right to tell people what they do not want to hear
I managed to see it. It was interesting. I was aware of Hunter Biden, but maybe not of other politicians. I cant really comment any further as the message isnt there. I wasnt offended but then neither of you have ever offended me directly, or if you have I`ve missed it. Hopefully we`ve all gained something from communicating to each other, but please respect I subscribe to Stockopedia as I want to be a better investor. I feel I need to avoid political arguments as it can make me emotional.
If as It seems you can’t debate something political without getting emotional then you shouldn’t do it
As for your comments below about the guy who said he was a psychiatrist stand by what I said he came across as extremely unprofessional and insulting he doesn’t know my back ground or anything about me
Dont throw stones unless you don’t mind getting a few back
Think the problem with many people is that they think what they feel is as important as facts
You just dont get it. It is not justified to throw stones in retaliation, which is what I think you`re doing. I believe politics often leads people to be angry and emotional- its just some people are more aware of this than others. I`m probably less emotional in debates than most people. Sometimes we use the wrong words. If you listen to someone rather than aggressively react, you may learn more. As you say we are not talking to one another face to face, so we probably need rules to manage our behaviour.
Yeah I get your point of view and am sure your heart is in the right place just remember ”the road to ruin is paved with good intentions “
I’m not angry or emotional their isn’t one person I actually dislike it takes energy to dislike someone there are people I have no feelings for
I know enough that most people just go with the flow don’t stand up and cause waves
There are good people bad people and most people who just want to be left alone unfortunately sometimes they won’t leave you alone and will take what you have away
If I wake up even one person on here to see that the world isn’t always as it’s presented I will be happy
Don’t trust the main stream media they have their own agenda anyone who doesn’t see that after covid I’m sorry to say my friend has drunk the cool aid
As for people like Starmer I have nothing good to say main stream politicians have backed themselves into a corner with Putin and China
When it comes to Ukraine there is only one person who can stop the drift to a bigger war and that is Trump he understands Putin will do a deal other wise comes down to how many people do you want to kill
Don’t believe the orange man bad message it’s silly
One more thing as Ricky Gervais said “just because your offended doesn’t mean your right “
Have a good weekend my friend
Thank you for the 1st part of the message. I`m not going to argue any more. I think we`ve had far too much psychology/advice for one day. Have a good weekend.
I was just requesting that people respect other people`s thought on here. I dont think calling people strange or gullible is appropriate. I think the quality of debate would be much better if we didn`t get personal. I havent red flagged this, so I am not alone in my thoughts.
Don`t let the tail wag the dog:
I replied to you but the message was quickly removed. Did you manage to see it?
ASML Holding NV (AMS:ASML) profit warning, although they are ultimately the only supplier for what they do! Read across across whole semi market pretty much. Plus further Biden and Trump Chinese, deglobalisation 'anti china' chatter and tariff talks rattled the Qs especially.Risk free Invesco QQQ Trust Series 1 (NMQ:QQQ) down over 2% today.iShares Russell 2000 ETF (PCQ:IWM) holding its last few days outsized bullish move.Vix up circa 10% at around 14.50.
The defence sector has seen considerable gains over the last year. Will a Trump presidency reduce defence spending in the US and across the NATO countries? There is an argument that the US will reduce its commitment to NATO with a consequential need for those countries to commit to greater spending. Aerospace & Defence ETFs have over 80% weighting to the US.
The defence sector has seen considerable gains over the last year.
Yes it has. Some interesting questions here. It's my impression that the coming global tsunami of investment in defence has really not yet been priced in. Rishi Sunak refered to 2.5 or perhaps 3% of GDP spend on defence as a 'war footing'. I mean really. Even the cold war was around 5 to 6% of GDP for the UK. We've got quite a shock coming?
Will a Trump presidency reduce defence spending in the US and across the NATO countries
Good question. I'd answer 'no' and 'maybe but probably not by much'.
Isolationist does not mean reducing spending on defence. Quite often its the reverse. Depends upon how paranoid the isolationists become? Plenty of good reasons for paranoia nowadays?
The US doesn't directly spend on the NATO countries. It does indirectly through the air bases and land forces it maintains in some NATO countries. And particularly through the intelligence and early warning installations. An isolationist US is even more likely to want intelligence and early warning systems?
There is an argument that the US will reduce its commitment to NATO with a consequential need for those countries to commit to greater spending.
Sort of. Provided that the NATO countries up their defence spending to meet their commitments then it doesn't seem that likely that the US would walk away from NATO?
The main concern is that the European countries may no longer able to rely upon the US to meet its treaty obligations - aka Article 5 - which provides for an attack upon one NATO state to be treated as an attack upon all, with each country obligated to provide military support aka boots on the ground. More than that, NATO countries have tended to rely upon the US playing a massive role - effectively going to war - in response to an attack on a European NATO state. It's now pretty clear thats wishful thinking? Probably has been for many years? during which we've been dumb, fat and happy, spending our illusory 'peace dividend'? Reversing that is going to hurt. For years?
For NATO to be able to respond to an attack without the US playing a massive role - that's going to need a different plan. And a whole heap more defence spending by all the European states. 5 or 6% is probably necessary - but politically unacceptable to talk about. Yet.
Aerospace & Defence ETFs have over 80% weighting to the US.Yes. This is where it really gets interesting. At least to me. War is a terrible thing. Most of us will lose out from a war. But some have a good war - defence contractors generally do. If only because all the equipment being destroyed needs to be replaced. Then there are new projects and technologies which suddenly get funded. There is plenty of profit to be made in supplying your own government. But the real profit gets made when you get to supply the rest of the world as well.
Even if the US government turns isolationist - the US defence industrial base is the de facto arms supplier to a lot of the world. The big gorilla. And its order books as a result of the Ukraine conflict have gone through the roof. If nothing else the conflict has shown that even decades old decommissioned US cast-offs are better than the latest Russian gear. Which has also come as a shock to a lot of the world. Not least Russia. Good for US orders though. Talk at recent trade shows is of countries making orders for air defence systems simply to get a delivery date defined. And that's generally a few years out. Most US companies are investing to increase capacity (as are UK companies) but that will take a couple of years - and profits will continue to rise once once more capacity comes on line?
Of course the world may just have fit of rational thinking and decide not to threaten going to war - I hope so - but right now I don't see that as very likely. Unfortunately I think we may have only just started here.
It's one of the sectors UK industry still does very well, Though its going to be quite a challenge to keep up with the pace of technology innovations going on right now as the Ukraine war progresses.
As a stock-picker I won't be buying an ETF but I remain on the look out for all the picks and shovels companies that will benefit from the increasing spend on defence and technology in the UK,
cheers and apologies for the rather verbose replies to your good questions,
Mark
Hi illiswilgig and thank you for your detailed and measured reply. Sadly I can only see the growth in defence spending being seen by most countries as a necessity. Modern warfare/defence will be led by technology and as you say the US has been the leader in this and will continue to be so. I have no expertise in the sector but see it as having inevitable growth. I hold VanEck Defense UCITS ETF USD A (LON:DFNG, Rolls-Royce Holdings (LON:RR.), BAE Systems (LON:BA.)
For sure ... no argument. But, mostly, the future follows a path clearly signified by the past.
As a small-time private investor, I will happily go with 'mostly'.
By and large, the really critical events or changes in the world will catch us unawares no matter how deeply we surmise, no matter how thoroughly we plan. We are just faint speckles ... what we think or theorise, really doesn't matter a damn.
That’s what’s called a black swan
The same guy who came up with that is the guy who wrote fooled by randomness in other post
As is said in many a financial document
past performance is no guarantee of future results
To understand the rest read the other book it’s puts it far better than I can
I read 50 or 60 pages. That must be far more than most managed :-). But I think it was enough.
In the end, I reckon we, none of us, know very much and mostly hugely overestimate our understanding and our capabilities.
Which book ?
please explain why you think that’s more than most managed and why you think it was enough
A popular book by Nassim Nicholas Taleb ... it is very well-known. But it's just one person's ideas about how to survive in a world where unknown unknowns can creep out and grab ya any moment of the day.
You talking about
The Black swan
Or fooled by randomness ?
A couple of books well worth reading about the dangers of thinking the future will follow past events
https://www.amazon.co.uk/Foole...
https://www.amazon.co.uk/Chang...
The UK has somehow got by, one way or another, for a very, very long time with one hopeless democratically elected government after another ... leaning to the left or leaning to the right.
By and large, things have gone OK. We rarely see rioters on the street. People get on with their daily lives. Too many live in poverty ... sometimes because they don't all try hard enough. Business keeps going ... but perhaps does not prosper as well as it perfectly might.
We have a section of the population with some very strange ideas about identity and sexuality ... but we can live with them and they can live with us.
We're always in a bit of a mess. But the UK remains a good country to live in. And will repay investment.
While I understand your argument and it is logical
The problem is that as most people do you are suggesting that the future will carry on in much the same way as the past which is a dangerous if understandable mistake the world today is different than the past in many ways
One of which is the different make up of the population
The people who make up the population of the UK are not the same people who made up the population in 2000 let alone 1980 so why would you expect them to act the same as people who lived here then ?
44% of the population of london where not born here for instance
https://trustforlondon.org.uk/...
Some other examples of the change in population over the past years
https://www.ethnicity-facts-fi...
https://www.ons.gov.uk/peoplep...
I always consider riots to be good news for the economy. That's when things really start to pick up!.
A Trump victory seems likely now. What are the implications? My guess is that it is good for gold and bonds, bad for equities.
Short term in the run up to the election there is likely to be volatility, but after the election the US stock markets will probably decline for 1-2 years before picking up again before the next election. The scale of the debt increase and the desire to kitchen-sink if there is a new incumbent could both be factors. Of course AI based breakthroughs could keep the market running higher for longer too. All that uncertainty is why I find risk parity approaches appealing.