Please see below article received from Brooks Macdonald this morning, which provides a global market update for your perusal.
What has happened
After last week’s dismal performance for global equities in general, Monday saw a modest bounce as trader ‘dip-buying’ took over. In local currency terms, the UK FTSE100 equity index was up +1.09%, the pan-European STOXX600 equity index was up +0.82%, while the US S&P500 equity index was up + 1.16%, with US megacap technology stocks leading the market. But the gains were muted. For context, the S&P500 index last week had endured its worst week since March last year, and its worst start to a September since data going back to 1953.
Earnings season – what did we learn?
The latest US quarterly (calendar Q2) earnings season is now effectively done, with over 99% of US S&P500 companies having already reported as of last Friday. What did we learn? The picture is mixed, but overall constructive. According to Factset, for Q2 the annual earnings growth rate for the S&P500 is running at +11.3%, putting it at the highest rate since Q4 2021. In terms of reported earnings, 79% of companies beat consensus, running above the 10-year average (of 74%). However, the scale of the ‘beat’ at 3.6% is below the 10-year average (of 6.8%). Finally, and more encouragingly, as regards the outlook the aggregate estimate for S&P500 earnings-per-share for calendar year 2025 has gone up (by +0.3%) as measured between 30 June and 31 August.
US politics on TV
Later today we see the first televised debate between US presidential hopefuls, Democrat’s Kamala Harris, and Republican Donald Trump. The debate kicks off at 9pm US Eastern Time but given that makes it 2am UK time tomorrow morning, I for one am not planning on watching it live! Keep in mind that the race to the White House is very close, and this TV debate is the only confirmed debate between the two candidates until election day which is now exactly 8 weeks today, on Tuesday 5th November. Even sooner, early voting in some states kicks off this month, including Pennsylvania next week on Monday 16th September, so this TV debate could prove very decisive for some voters. It may also carry some impact for markets potentially should one of the candidates in tonight’s debate come out decisively on top.
What does Brooks Macdonald think
Markets are still split on whether to expect a 25 basis points (bps) cut in US interest rates next week, or a larger 50bps cut instead. The latter case would only seem likely if the US Federal Reserve thought recession risks were rising. But some perspective is important. While there is some slowdown in jobs growth appearing in the latest labour market data, the signals are not consistent with an economy tipping into recession currently – as a case in point, last week’s non-farm payrolls showed average hourly earnings increasing month-on-month and beating expectations, while average weekly hours worked also ticked higher as well. All in all, then, a soft-landing remains more likely than either a hard- or no-landing at this stage.
Bloomberg as at 10/09/2024. TR denotes Net Total Return.
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Chloe
10/09/2024