Markets

WEEKLY FOCUS                                  02 July 2018

Our proprietary GDP tracking model showed that the growth of the global economy peaked in January 2018 and can slow marginally but nominal rates remain high. The S&P500 also peaked in January and has since then been range-bound. Underlying economic indicators showed that the US diverged from major economies with better year on year GDP growth rates but the threat of inflation and trade wars is a headwind.

What are the implications for investors and what might the market be telling us? Firstly we are seeing a change in sector leadership in the market since the dip of last February. Indeed, the real estate and utilities segments have outperformed technology, the driver of last year’s performance with gains of 2.57% and 1.8% respectively since 1 Feb.

Secondly, the GDP growth forecast for the second quarter is still close to its recent trend highs and lagging indicators like earnings will be supportive of valuations in the near term. Although growth indicators are slowing sequentially, their nominal rates remain high and favourable for stocks in the longer term.

Thirdly, the positioning of speculative investors in the S&P500 remains high and can lead to increased volatility.

Therefore, long term investors should continue to have well diversified portfolios to take advantage of opportunities.   

S&P500

2,718

-1.33%

1.67%

S. Africa

3,498

1.50%

-7.74%

FTSE100

7,637

-0.59%

-0.66%

DAX

12,306

-2.18%

-4.73%

CAC40

5,324

-1.19%

0.21%

Swiss Mkt.

8,609

-0.08%

-9.04%

FTSE MIB

21,626

-1.20%

-1.04%

Shanghai Comp

2,847

-1.47%

-13.90%

BSE Sensex

35,423

-0.75%

4.01%

Nikkei

22,305

-0.94%

-4.19%`

Major currencies

USDZAR

13.73

2.15%

10.95%

EURUSD

1.17

0.24%

-2.61%

GBPUSD

1.32

-0.46%

-2.26%

USDCHF

0.99

0.27%

1.67%

EURCHF

1.16

0.52%

-0.97%

USDJPY

110.68

0.65%

-1.78%

EURGBP

 0.88

0.72%

-0.35%

USDAUD

1.35

0.50%

5.37%

Dollar Index

94.35

0.18%

2.74%

Commodities

Brent

79.44

5.15%

18.80%

WTI Oil

74.15

8.12%

22.72%

Copper

 2.95

-2.70%

-10.03%

Aluminium

 2,131.75

-1.22%

-6.32%

Platinum

856.90

-2.48%

-8.31%

Sugar

11.86

-1.58%

-21.77%

Corn

350.25

-1.96%

-0.14%

Coffee

111.50

-2.06%

-11.65%

Gold

1,251.30

-1.27%

-4.43%

Cotton

85.38

-0.50%

8.81%

 Sovereign Yields

US10Y

2.86

(0.04)

0.46

UK10Y

1.28

(0.04)

0.09

Germany10Y

0.30

(0.03)

(0.12)