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Weekly Market Focus - 28 May 2019

Markets

WEEKLY FOCUS: Long term investors maintain allocations to quality stocks                                  27 May 2019
 

 

Indices retraced slightly last week as we enter a mini-cycle similar to 2015, the long term picture remains bullish. As the chart above shows defensive sectors have outperformed cyclical sectors while at the same time exhibiting lower volatility on a one year basis. This ‘anomaly’ is on account of short term investors turning bearish while long term investors maintain their allocations. The exceptions are Technology, a secular growth story and Discretionary, a sector where short and long term fundamentals remain relatively strong.

 

IHS Markit’s estimates of US manufacturing PMI has been soft and last week’s data of 50.6 is at a decade low due to weaker demand. This tallies with a negative performance of the Industrial sector ETF in spite of a 17% level of annualized volatility. Similarly, the reduction in input costs despite  tariff uncertainties, led to a decrease in output charges. Again this tallies with the fall in value of the Energy and Materials sector ETFs. These are transitory factors, which provide an opportunity to allocate on dips, but is also popular trade judging by the soft declines of blue chip counters like Microsoft, Nike, Visa or LVMH currently as investors resort to buying quality stocks in spite of higher prices. Longer term data remains bullish as consumer sentiment is at a 15 year high, wage growth is at cyclical highs, the unemployment rate is at a 50 year low and estimate for GDP growth is some 2.6% for this quarter and 2.4% for the calendar year.

 

European data remains soft as the bloc faces headwinds from a slow-down in the Chinese economy mainly as a result of trade sanctions. In China industrial production, fixed asset investments, retail sales, exports and loan growth have declined sequentially and may affect the pace of recovery of the Eurozone.

 

 

 

Value

Week

YTD

Equity Indices

 

 

 

S&P500

2,826

-1.17%

13.69%

S. Africa

3,276

-4.36%

0.88%

Stoxx50

32

-0.92%

13.11%

FTSE100

7,278

-0.96%

8.07%

DAX

12,011

-1.86%

13.75%

CAC40

5,317

-2.24%

13.63%

Swiss Mkt.

9,667

0.08%

14.68%

FTSE MIB

20,376

-3.46%

11.20%

Shanghai Comp

2,853

-1.02%

14.40%

BSE Sensex

39,435

3.96%

9.31%

Nikkei

21,117

-0.63%

5.51%

Major currencies

 

 

 

USDZAR

14.40

-0.13%

-0.21%

EURUSD

1.12

0.41%

-2.05%

GBPUSD

1.27

-0.06%

0.05%

USDCHF

1.00

-0.88%

1.78%

EURCHF

1.12

-0.48%

-0.36%

USDJPY

109.31

-0.70%

-0.88%

EURGBP

0.88

0.47%

-2.12%

USDAUD

1.44

-0.81%

1.73%

Dollar Index

97.48

-0.35%

1.58%

 Commodities 

 

 

 

Brent

68.69

-4.87%

31.59%

WTI Oil

58.63

-6.58%

29.34%

Copper

2.70

-1.32%

0.60%

Aluminum

1,802.25

-2.92%

1.14%

Platinum

805.50

-1.71%

1.93%

Sugar

11.66

0.95%

-5.89%

Corn

404.25

5.48%

7.66%

Coffee

93.30

6.81%

-7.58%

Gold

1,283.60

0.49%

-0.44%

Cotton

68.34

3.78%

-5.44%

 Sovereign Yields

 

 

 

US10Y

2.32

(0.07)

(0.39)

UK10Y

0.96

(0.08)

(0.31)

Germany10Y

(0.12)

(0.01)

(0.35)

 

Contact us: Durban +27 (0) 31 566 3365 | CPT +27 ( 0 ) 21 851 0920 | JHB +27 ( 0 ) 11 017 7230 | Email: enquiries@pegasus-wm.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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