Market Musings 19/02/22:
What is holding up best today?
Podcasts that might interest you:
Why are we downgrading equities to neutral?
- What risk factors have driven our decision to downgrade equities to neutral?
- Why are we still positive on equities over the longer term?
- What drivers would prompt an upgrade?
Also available in Apple Podcasts, Podcast Addict, Spotify podcast platforms
(search for “BNP Paribas Wealth”)
Weekly Summary:
- Nasdaq index looks very vulnerable: the tech wreck may not be over yet
- US growth slowdown in progress: the Atlanta Fed’s GDPnow tracker points to only 1.3% annualised economic growth in Q1 2022.
- US goods inflation is very likely to fall in the coming months: the slump in Chinese producer prices for goods, and a sharp slowdown in credit growth both strongly suggest lower US, global inflation ahead.
- What is performing best, as the Nasdaq falls? UK FTSE 100, commodities, Europe Dividend/Value funds/ETFs.
- Precious metals break out: gold, silver and platinum.
- Industrial metals still look good: GSCU, AIGI.
- Pick of the Week: VanEck Global Mining ETF (in pounds).
1. Nasdaq looks shaky
Has the Nasdaq tech-heavy index bottomed yet? I wouldn’t be so sure, as the chart still looks weak.Even from a purely technical viewpoint, tech-oriented indices and ETFs (see the ARK Innovation ETF below in orange) remain in downtrends, with no obvious signs of stabilisation.
Nasdaq Composite index, ARKK ETF both still in downtrends
Source: Federal Reserve Bank of Atlanta
We have not seen any big selling purge yet from US retail investors in my view, and given how retail investors loaded up on stock exposure in 2021, especially in the Tech sector, this remains a live possibility.
To put it another way, one wants to buy when there is stock market “blood on the streets” - which I do not yet see.
2. US growth is slowing as the Fed’s words work their magic
Even before the US Federal Reserve has even begun to raise its benchmark Fed Funds rate from the current 0.08% - due to lift off in March - US economic growth is slowing rapidly from the 6.9% annualised growth rate reported for Q4 2021.
According to the Atlanta Fed’s GDPnow tracker, current economic data point to an annualised 1.3% growth rate for this quarter, as current multi-decade high inflation bites into household spending.
US…
