The latest Weekly Market Views from our managed portfolio service team covers market moves, the latest data releases and what to watch.
For information purposes only. The views and opinions expressed here are those of the author at the time of writing and can change; they may not represent the views of Premier Miton and should not be taken as statements of fact, nor should they be relied upon for making investment decisions.
In brief
- Nvidia’s earnings slightly disappoint but US equity market enjoys strong US economic backdrop.
- Easing inflation in Europe supports rate cut expectations.
Chipping in
This week provided the anticipated earnings release for Nvidia covering the second quarter. One of the biggest chip producers in the world, a proxy for global growth and consumption, highlighted a continued theme that chip demand remains strong, although revenue growth slowed from previous quarters.
Although the figures were good, they didn’t quite meet the lofty expectations baked into its price and subsequently sold off. Our positioning remains cautious on the US and specifically the Magnificent 7. Stretched valuations remain the concern and expected earnings growth of 10% for this year and 15% for next for the US market appears lofty. Any disappointment for earnings over the next six months could lead to a pull back.
Once again good data means good markets and it was the economic backdrop that led markets higher on Thursday as US gross domestic product (GDP) came in at 3% for the second quarter, a revision upwards. These data points are backward looking and it was this release alongside US durable goods, purchases of physical products with a shelf life of at least three years, which bounced 9.9% over the month, that led markets higher.
Last Friday the Jackson Hole symposium provided nothing to upset markets and signalled that we remain on track for the interest rate cutting cycle – a bit boring as we had hoped. This led to further support in European equities, which reached all time highs as the combined German and Spanish inflation readings came in below expectations.
Our reduced emerging market position continues to be justified by the Chinese equity market performance facing a fourth straight month of declines. Notable was BYD, the electric car producer, which has been in the spotlight for ‘dumping’ (selling at prices below its own domestic market) in the developed world to gain market share. Its results showed the issues stoking trade tensions and the impact of tariffs.
(Wonder)wall of worry
In a month that started with the first 2% daily fall in the US equity market in almost a year, it appears equities will recover to finish positive for the month. The Fed highlighted the interest rate cutting cycle is about to commence and markets remain optimistic as GDP data signals that the US economy is doing fine.
History tells us September is never an easy month for equity markets as analysts return from holidays and re- adjust forecasts. Next week we will get company surveys covering manufacturing and servicing, an indicator of the next three months’ trading, as well as non-farm payrolls in the US.
Good data has been good for markets over the last couple of weeks and no doubt analysts will be looking for a continuation of this trend. Any weakness may challenge this ‘Oasis’ which cannot ‘Live forever’, igniting the debate on a sharper slowdown. For now, affirmative data has shown markets will ‘Roll with it’ for now.
