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Weekly Market Focus 15 October 2018

Markets

WEEKLY FOCUS Going Forwards Looking for Key Signals                                  15 October 2018
 

 

After we reached all-time highs in September, the market dipped during last week and the S&P500 only regained its 200 day moving average on Friday to close to +3.50% in the year to date. The global divergence continued with major European and Asia indices suffering sharp dips which increased their negative returns in the year to date.

 

So what happened? It is not clear what served as the actual catalyst for the dip but is in the nature of markets to go up and down. We were coming from a high base in the S&P500 and other major indices and a dip from there was not unexpected especially as it seems to have been exacerbated by electronic algorithmic trading.

 

Is this a blip or the start of a bear market? The US has diverged from the rest of the world and our call was to be overweight this market from the start of the year. Macroeconomic indicators weaken before a bear market starts and this is not the case for the time being as measures of demand are strong, inflation is under control, employment remains strong, treasury yield spreads are not flashing red and earnings numbers of corporations are supportive. Barring a black swan event, there does not seem to be an immediate US bear market risk.

 

What next for strategy? Managers will closely look at three major factors starting with a deceleration in US GDP growth and corporate earnings when they will start calls for a rebalancing of portfolios in favour of defensive sectors as opposed to the leaders of the past quarters, namely ‘growth’ and ‘high beta’. Secondly, trade tensions may further slow growth momentum in China and Europe and are areas to be underweight. Thirdly, Brexit will affect both the UK and the EU and the pound remains a currency to be underweight. The timing on these is difficult to predict but close analysis of data is vital going forwards

 

 

Value

Week

YTD

Equity Indices

 

 

 

S&P500

2,767

-4.10%

3.50%

S. Africa

3,210

0.16%

-15.34%

FTSE100

6,996

-4.41%

-9.00%

DAX

11,524

-4.86%

-10.79%

CAC40

5,096

-4.91%

-4.08%

Swiss Mkt.

8,660

-4.22%

-7.81%

FTSE MIB

19,256

-5.36%

-11.89%

Shanghai Comp

-3.72%

-3.72%

-17.86%

BSE Sensex

34,734

1.04%

1.99%

Nikkei

22,695

-4.58%

-0.31%

Major currencies

 

 

 

USDZAR

14.52

-1.73%

17.35%

EURUSD

1.16

0.34%

-3.63%

GBPUSD

1.32

0.24%

-2.66%

USDCHF

0.99

-0.02%

1.77%

EURCHF

1.15

0.31%

-1.92%

USDJPY

112.20

-1.34%

-0.43%

EURGBP

0.88

0.10%

-0.99%

USDAUD

1.40

-0.94%

9.60%

Dollar Index

94.91

-0.42%

3.35%

 Commodities 

 

 

 

Brent

80.43

-4.43%

20.28%

WTI Oil

71.34

-4.04%

18.07%

Copper

2.79

1.53%

-14.85%

Aluminum

2,029.25

-4.29%

-10.82%

Platinum

841.80

2.00%

-9.93%

Sugar

13.07

3.48%

-13.79%

Corn

373.75

1.49%

6.56%

Coffee

116.55

6.98%

-7.65%

Gold

1,218.10

1.41%

-6.97%

Cotton

78.36

2.98%

-0.14%

 Sovereign Yields

 

 

 

US10Y

3.17

(0.07)

0.76

UK10Y

1.63

(0.09)

0.45

Germany10Y

0.50

(0.08)

0.07

 
Contact: DBN +27 ( 0 ) 31 566 3365 | CPT +27 ( 0 ) 21 851 0920 | JHB +27 ( 0 ) 11 017 7230 | Email:enquiries@pegasuswm.com
Disclaimer: The research report has been prepared for information purposes and does not constitute an offer. While reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and the company accepts no liability whatsoever for any direct or consequential loss, including without limitation any loss of profits, arising from reliance on this report.
 

 



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