Market Musings 290423:
Europe, UK, Japan, Gold lead the way higher
Europe and UK continue to outperform the US
Summary:
What happened this week - economy and markets
I stay positive on strong uptrends in Europe (France) and UK equities
Japanese equities quietly break out
Gold achieves a new all-time monthly high of $1990/ounce, I still like precious metals
Sell in May and go away? Statistically speaking, perhaps better to wait until June…
Stock to research further: IOF Iofina
Podcast:
Why money market funds are the new must-have for investors
In this podcast Edmund Shing gives a crash course in money market funds.
· Definition of money markets
· Advantages today
· Why is this “deposit flight” happening now and will it continue?
· Will this contribute to ongoing stress in the US banking system?
· Geographical comparison between the US and Europe
What happened this week (in short)
US inflation is slowing (core PCE, the US Federal Reserve’s preferred measure), but not that much. The Fed is very likely to raise US interest rates next week, to 5.25%. Hopefully this will be the peak interest rate in this cycle, but this will depend on whether US inflation falls faster over the coming months (as I expect).
Eurozone growth is basically flat in Q1 2023: Spain and Italy showed decent growth, France OK but Germany disappointed with no growth at all in Q1. Clearly, German industry is still suffering from the aftereffects of the energy crisis, greater competition in car production from China (BYD), the US (even Tesla!) and South Korea (Hyundai, Kia). They are still paying for their slow start in electric vehicles.
In contrast, underlying US growth was actually strong in Q1 (once one strips out volatile items like inventories) - US final demand grew +3.2% on an annualised basis in Q1, underlining that US consumers are still spending. However, this will clearly not last and there is still a high chance of US recession sometime later this year.
Long-term interest rates (10-year government bond yields) stable to lower - US 3.4%, UK 3.7%, Germany 2.3%.
Q1 US and European company results are so far a bit better than expected: especially in Europe, most companies reported better-than-expected…
