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Weekly Focus - 15 June 2020

Weekly Focus                             15 June 2020

Investors take profits but focus on strong 2021 growth estimates
 

All major indices ended last week in the red. The start of the week had been promising as the reopening of New-York and other parts of the US gave a lift to risk sentiment. Furthermore Kevin Hasset, a White House advisor said the odds of a further fiscal stimulus package was 100%. The mood changed in midweek as new cases of infections of the coronavirus rose in 23 states which included populous states like California, Texas and Florida. On Wednesday, Fed Chair Powell revealed that the central bank estimated the pace of the recovery would be slow. This followed a two day meeting during which the central bank kept interest rates near zero and signalled there would not be a hike before 2023 at least. The dip which was the sharpest since March, may also have been due to profit taking by investors as some sectors have hit record highs. Fears of a second wave of contaminations helped shares such as Amazon and Netflix while but shares of airlines, tourism and other sectors related to the opening of the economy lagged.

 

In Germany, industrial output fell by 25% year on year and the trade surplus fell to EUR 3.2 billion. The central Bank of France forecast that the economy would contract by 10.3% this year but that there would be a strong rebound of 6.9% next year.

 

The prospects of a strong rebound next year is also shared by stock analysts. Factset estimates that the bottom-up target price for the S&P500 in 12 months is 3,271 which is some 9% above the closing price of the week. The Healthcare sector has the widest margin of growth as the bottom up target price was 15% higher than last week’s closing price. Interestingly, analysts’ estimate that earnings for the S&P500 for next year will grow by an impressive 28% (chart above) and revenues will grow by 8.5% over the same period. The stock market remains a discounting mechanism and this may be an explanation for the perceived disconnect between the economy and equity indices.   

 

 

Value

1 Week

YTD

Equity Indices

 

 

 

S&P500

3,041

-5.91%

-5.86%

FTSE JSE All Share

50,526

0.54%

-11.58%

Stoxx50

3,154

-6.37%

-15.79%

FTSE100

6,105

-5.68%

-19.06%

DAX

11,949

-6.79%

-9.81%

CAC40

4,839

-6.50%

-19.05%

SMI Index

9,796

-3.51%

-7.73%

FTSE MIB

18,888

-6.64%

-19.65%

Shanghai Comp

2,919

-0.62%

-4.28%

BSE Sensex

33,429

-2.70%

-18.93%

Nikkei

21,993

-4.97%

-6.89%

Major currencies

 

 

 

USDZAR

17.18

3.04%

22.75%

EURUSD

1.13

-0.26%

0.47%

GBPUSD

1.25

-1.56%

-5.56%

USDCHF

0.95

-0.64%

-1.70%

EURCHF

1.07

-0.89%

-1.23%

GBPZAR

21.52

1.43%

15.86%

EURGBP

0.90

1.33%

6.45%

USDAUD

1.46

2.83%

2.85%

Dollar Index

97

0.45%

1.03%

 Commodities 

 

 

 

Brent

37.87

-7.13%

-42.59%

WTI Oil

35.06

-8.09%

-42.52%

Copper

2.57

0.37%

-8.51%

Platinum

807.85

-6.46%

-16.84%

Sugar

11.88

-0.50%

-11.48%

Corn

329.62

-1.24%

-14.99%

Gold

1,733.80

1.68%

12.94%

 Sovereign Yields

 

 

 

US10Y

0.67

-24.19%

-65.29%

UK10Y - price

137.32

0.62%

4.52%

Germany10Y

-0.45

40.25%

138.50%

 Deposit rates with selected banks

 

The MCB Ltd, 6M USD 1.20%

 

 

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