S&P 500 breaches 5,000 !

INSIGHT WEEKLY : February 11, 2024

An easy to read economic and financial summary. If the images do not load, click to download external images in your email to see the newsletter in full, or click the link above to read online.

🌐 Overview

🌐 Major indexes

Tech stocks and Japan continue to outperform, with the Nasdaq Composite being the best performer of the week, and S&P 500 soaring to a new record.

🇬🇧 UK

Interest rates The economic data for the fourth quarter of last year will be published on Thursday. It the economy shrunk, UK would be said to be in a technical recession. Two successive quarters of negative growth is the definition of a technical recession. There was a contraction of 0.1% in Q3. October was +0.3% and November was -0.2%, December is expected to be negative pushing the overall quarter to be negative. A technical recession would add pressure for the Bank of England to go ahead with the first interest rate cut very soon. The government has now hinted that there may not be significant tax cuts in the upcoming budget, so getting growth in the economy may have to come from lower interest rates than from tax cuts.

Residential property UK agents are reporting house sales and demand in January rising for the first time since 2022. Both Halifax and Nationwide have reported higher prices in recent months. With the expected reductions in mortgage rates during 2024, demand is likely to pick up in the coming months. The demographic has changed with more owner occupiers seeking to buy and much less interest from investors. The UK will need to attract more investors by making the tax structure less punitive in order to support the construction of new homes and also help urban regeneration.

FTSE100 is -1.9% since the start of the year.

🇺🇸 US

S&P500 had another record this week breaking through the 5,000 barrier. The good earnings announced in the previous week, and optimism on AI helped to keep the index on this upward trend. There is also the expectation of interest rate cuts in the coming months. There is a growing contrarian view that the market is too optimistic and the underlying expected earnings are not going to be realised, at least in the short term. When the correction happens, how big a drop will it be, and what will be the new trend ? These are some of the questions on the minds of investors. See S&P 500 chart below.

The “Magnificent Seven” — Nvidia, Microsoft, Meta Platforms, Amazon, Apple, Alphabet and Tesla have been driving the gains in recent months but recently both Apple and Tesla have underperformed. Will the Magnificent Seven become the Fab Five ?

Tesla is down 22% in the year to date but there was a pick up of 5% in the last week. Earlier warnings of lower sales of electric cars and Elon Musk’s warnings of the likelihood of Chinese manufacturers “demolishing” other car companies has kept investors on the sidelines. China’s BYD overtook Tesla in late 2023 to become the largest seller of EVs. The graphics below shows Tesla’s sales by model, and Tesla’s share price.

Apple’s sales are falling in China and its shares have taken a hit, rising just 1.7% in the year to date. iPhone has been a large source of revenue but now trending down. Apple might need new products to replace falling iPhone revenues. Or get more from its existing line up. On Friday, Microsoft ($3.1 trillion) overtook Apple ($2.9 trillion) as the world’s largest company by market value. The graphics below shows Apple’s revenue by product and share price.

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🇯🇵 Japan

Nikkei 225 increased 2% in the week to a 35 year high as overseas investors continue to have interest in a recovering Japan. There is a growing feeling among global investors to “Buy Japan, sell China”.

Inflation is not rising to the desired 2% level as the economic data is weak, as wages decline and demand remains weak.

Interest rates The Bank of Japan is looking to move up from its current negative interest rate. The IMF has advised moving away from the Bank of Japan’s loose monetary policy while maintaining financial stability.

See previous spotlight on Japan.

🏅5️⃣ Billionaire Leaderboard

Change in week :

1. Bernard Arnault and family (LVMH) $219bn ⬆️ $8bn

2. Elon Musk (Tesla, SpaceX)$201bn ⬆️ $3bn

3. Jeff Bezos (Amazon) $196bn ⬆️ $2bn

4. Mark Zuckerberg  (Facebook/Meta) $165bn ⬇️ $2bn

5. Larry Ellison (Oracle)  $145bn ⬆️ $1bn

SPOTLIGHTS

Earlier :

Residential property

Japan

Last week : India - an emerging economic power

Coming soon : National debt, future growth sectors, AI, Gold and more !