Category: Market Update
Market Update: Market jitters
Global stocks were recovering well from last week’s sell-off – then took another plunge on Thursday. AI-related firms again dominated the narrative. Despite strong quarterly earnings results, Meta’s expected AI investment plans renewed fears about unsustainable, debt-fuelled AI growth. Investors are increasingly nervous that the profit growth that has fuelled markets for years cannot go on forever. Why these doubts are creeping in right now is not clear; underneath the noise, the fundamentals for stocks are still improving.
Market Update: Back to fundamentals
US tech stocks continue to dominate market moves – but even they did not have an especially strong week. Markets are a little nervous that big tech’s extraordinary earnings growth might have peaked. Those nerves led to volatility on Thursday and Friday, following an apparent misunderstanding of OpenAI’s revenue figures (more on that below), but tech stocks mostly recovered. The recovery shows how optimistic investors are about the AI theme, but the whole episode shows that this optimism partly relies on some poorly understood figures about AI growth.
Market Update: Back to narrowing market breadth
Global equities struggled somewhat last week. US tech stocks are roughly where they were last Friday – but many others took a hit. Markets see AI-fuelled growth as too strong, raising interest rate pressures for the rest of the economy. But last week, those pressures came back to bite the AI leaders themselves. Today’s lower-than-expected US employment figure eased concerns about an overheating economy, at least. As such, strong earnings growth should still be enough to buoy markets over the coming weeks.
Market Update: Waiting for Goldilocks
Government bond yields keep rising. The US 10-year yield shot up to 5.2%, its highest level in nearly 20 years. This pushed up yields for all other bonds. That was not a problem for stock markets – until it was. Equities continued the theme of shrugging off bond drama in the early part of last week, but most indices dropped in the last few days. The one exception, perhaps unsurprisingly, was the mega-cap US tech stocks. How much longer can the AI trade go it alone?
Market Update: The real cost of oil…
Last week was heavy on narrative but, for the most part, light on stock market movement. President Trump bristled at Canada’s flirtation with Europe, tech leaders made a plea for slower AI development and attacks on Middle Eastern oil infrastructure continued. These stories had only minor impacts, not moving markets too much in either direction.
Market Update: Bond yields’ multi-facetted messaging
We ended last week with global stocks once again a little higher than they were the week before, but bond prices a step lower. Global government bond yields – the inverse of prices – have now been steadily rising for over two months. Higher yields make investors nervous, but those nerves have been largely absent from equity markets. When you throw oil price risks and likely interest rate rises into this mix, the relative calm in stock markets is remarkable.
Market Update: Wanting isn’t getting…
Last week saw little movement in the main asset classes. Generally, equity markets have moved a bit higher, longer bond prices and yields are unchanged and the US dollar has recouped much of the losses from the week before.
Market Update: Bond yields back on the market stage
Last week was the first time this summer where we observed the seasonal lack of trading liquidity becoming an issue in markets. In last week’s market update, we titled ‘Hot weather, chilled markets’ and wrote that the “market-moving narratives are basically the same as they have been for weeks: strong tech earnings, receding energy price fears and lingering anxiety around high government bond yields”.
Market Update: Risks take a holiday
Capital markets had another decent week, led by US tech stocks and propelled by AI-related corporate earnings reports. How many times have we written that sentence? The market-moving narratives are basically the same as they have been for weeks: strong tech earnings, receding energy price fears and lingering anxiety around high government bond yields.
Market Update: New month, new dynamics
The announcement of yet another Iran deal buoyed stock markets last week. Iran and Oman reportedly agreed a new shipping route through the Strait of Hormuz, which would temporarily solve the issue that collapsed the US-Iran ceasefire last month. The normalisation of global energy supplies still depends on negotiations between Washington and Tehran, but markets reacted with their now typical optimism: oil prices fell to $80 per barrel, and US stocks broke new all-time highs. It all reversed somewhat late on Thursday after details of the deal unveiled features that would make it unacceptable to the US, given their provocative...
Market Update: Deliberately unhelpful?
Last week saw marked volatility in bonds and a number of major high-profile stocks. Some of it has been a little concerning and yet, most portfolios will probably show a reasonably positive outcome. That’s what diversification is all about. The major global themes continue to be AI, the Middle East conflict and now, after a period in the background, interest rates and yields.
Market Update: The world gets riskier
Equity and bond markets came under pressure last week, as oil prices rose above $100 per barrel again. The downside was clearest in bond markets, with long-term government yields moving up sharply. Stocks held up a little better in aggregate in the early part of the week, but all the risks around make them look increasingly fragile.
Market Update: Markets going in circles
The summer lull has arrived early. Broad stock indices, bonds and even oil prices have bounced up and down over the last two weeks without any clear direction. The previous AI winners, particularly semiconductors (chips), are the exception: they have swung from strongly positive to strongly negative, despite there being no one specific negative catalyst for this sentiment shift. The themes are still as they have been for months: the war in Iran, US interest rates and AI growth potentially running out of steam. Investors still do not know what to make of them all. But pausing for breath is...
Market Update: Geopolitics refuses to leave the stage
Just as markets had downgraded the risks emanating from the Middle East, they flared up again. Yet again, however, it is telling how measured the market’s reaction has been to ships being set ablaze in the Strait and the consequent military responses.
Market Update: Second half starts with wary market mood
Global stocks recovered from last week’s sell-off, but are still only roughly flat from a month ago. Once again, the previous big winners – like US tech – are the most under pressure. The week before last, we put these moves down to institutional investors rebalancing their assets at the end of a strong quarter. Further pressures last week suggest something else might be going on.
Market Update: Markets heading for holidays…
Stock markets, predictably, wobbled last week. Investors have seen great returns this quarter despite intense global risks, so now many institutional investment managers must rebalance their asset weightings back to target – by selling the assets that have done well. Rebalancing selling pressures are temporary, but the extent of this sell-off suggests that markets might be less fun in the second half of the year. Drier liquidity conditions and market jitters could mean stable but slightly less spectacular returns ahead.
Market Update: Markets firm but fair
The deal between US and Iran, which extends the ceasefire and opens the Strait of Hormuz, was unequivocally good news for markets. Oil prices are sharply down, global stocks are up and long-term bond yields have calmed.
Market Update: IPOmania triggers market self-doubt
Equities started last week poorly but ended strong – a reversal of the week before. Trading liquidity was initially tight as investors contemplated a glut of newly issued shares, most notably today’s SpaceX IPO, but liquidity returned on Friday amid good news stories. Recent volatility has largely been in tech sectors. That is why UK and European markets were steady compared to the tech-heavy US, despite the European Central Bank (ECB) raising interest rates.
Market Update: Waning momentum – growing concerns
Until Friday lunch time, it was a fairly dull week for markets. News of an Israel-Hezbollah ceasefire eased concerns but did not materially change the Middle East stalemate. As at Friday afternoon though, traders were digesting a stronger than expected US employment report. May’s surprising bounce in job creation suggests a stronger US economy than might have been expected, given higher fuel prices.
Market Update: Calmer markets?
Global stocks pushed higher last week, led yet again by global tech stocks. Semiconductor chip makers were especially strong. On Thursday, Axios reported that US and Iranian officials had agreed a 60-day ceasefire extension, during which they would negotiate a resolution to Iran’s nuclear program. The ongoing talks have calmed nerves and substantially lowered oil prices – to below $90pb at the time of writing, down from $110pb at the start of last week.