It is worth noting that according to Factset data, US corporations which have 50% or more of their revenue derived from foreign sources have considerably under performed domestically oriented corporations on revenue and earnings.​​​​​​​

Short Term Headwinds Emerge But The Long Term Outlook Is Intact

A Spike In Volatility Brings About A Much Awaited Dip

Trade tensions between the US and China last week led to a spike in the VIX index, a measure of volatility of the S&P500 which reached its highest level since January.​​​​​​​

Long Term Investors Maintain Allocations To Quality Stocks

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.​​​​​​​

Global Economic Growth Slows

President Trump who returned from his European trip walked back the proposed sanctions on Mexico and the S&P500 settled above its critical 200 day moving average level.

Dip Buyers Patiently Await Another Opportunity

The announcement of new tariffs on Mexico last Friday caused the S&P500 to lose its important 200 day moving average support level

Markets Await The G20 Meeting For Direction

The G20 meeting in a fortnight will shed light on whether trade tensions will subside and global monetary policy responses will be better coordinated.

Soft Economic Data Keeps Treasury Yields Low

At the ECB forum in Sintra, President Draghi hinted at measures to combat soft growth and falling market expectations of inflation numbers. There could be a further reduction in interest rates, the extension of forward guidance but more importantly the restart of the quantitative easing program.

Trade Talks and Central Banks will Support Equities

As the rate of growth of both the US and Chinese economies is slowing, President Trump and Premier Xi used the G20 meeting to reestablish trade talks by making concessions to each other. Analysts now fear that the White House might turn its attention to the EU which is setting up a payment system to counter US sanctions on Iran as it restarts its uranium enrichment program.

When Bad News Is Good News

The hard data tallies with soft data like business confidence and surveys which point to a weak Q2 GDP. Interestingly, investors will welcome this weakness which opens the doors to central bank easing.

S&P500 and DJIA reach all-time high

The S&P500 index broke new records and closed on the 3,000 level but most European indices ended lower after France’s approval of a 3% digital tax on revenues generated within its territory by foreign technology companies drew the ire of the US administration. 

Economic Data Points To Continued But Slower Growth​​​​​​​

According to Thomson Reuters, earnings for this quarter are forecast to increase by 1% year over year and revenue by 3.4%; if this materializes, it would be a significant achievement considering it would still be an improvement on the stellar results of last year.​​​​​​​

US Interest Rates Set For Cut After 10 Years

Investment sentiment was buoyed by the possible restart of trade talks between the US and China and a better than expected GDP annualized growth of 2.1% for the quarter. Jobless claims figures also fell sharply and durable goods orders when stripped of transportation (affected by Boeing) rose more than analysts’ estimates.

The US economy fights international headwinds

After reaching all-time highs of 3,027 a week before, the S&P500 retraced to close last week near its 50 day moving average of 2,930. As in May, the catalyst was a Trump tweet announcing new tariffs on imports from China.

A Spike In Volatility Helps Investors Buy On The Dip

Last week, the S&P500 VIX index a measure of volatility, spiked to its highest level this year. The energy sector was the most affected after a surprise rise in US inventories and yields on the 10 year treasuries fell to their lowest level since 2017.

The US Sovereign Spread Compression Is Transitory

Most major indices ended lower for the week on trade tensions, growth worries and tighter financial conditions. However three sectors within the S&P500 advanced by 1% or more led by the consumer staples segment which benefitted from solid earnings from Walmart which drove the share price 8% higher.

Short Term Equity Price Gains Depend On Multiple Expansion

Companies within the S&P500 have reported financial results for quarter 2 2019 and the growth compared to last year has been encouraging in spite of the stellar performances of 2018. Sales has grown by 5%, earnings by over 3% and margins rebounded to 12% even if they remain below the 12.6% peak of quarter 3 of 2018.

Risk Assets Benefit From De-escalation Of Trade Tensions

An increase by 0.6% in retail spending was the fastest pace in three months but a fall in consumer confidence measured by the University of Michigan showed a drop to levels of 2016; trade tensions may be affecting morale although so far, this is not showing in the hard data as figures on employment, wage growth and an array of measures of demand remain at cyclical highs.

Policy Easing Talks Leads To A Decline In Volatility

Federal Reserve Chair Powell said that since the second part of last year the economies of Germany, China and other European economies had been slowing as a result of trade tensions and this would weigh on the US economy. However he was optimistic that there was no recession on the cards and that the growth rate for this year would remain at around 2% and would be driven by consumer spending.

Financial Conditions Improve After ECB’s Easing

While the S&P500 rose by 1%, there seems to have been a change in sector leadership as the Russell 2000, an index of small capitalization stocks which has lagged in the year to date closed higher by 5%.

Oil Prices Spike But Broader Indices Remain Range-bound​​​​​​​

US equities ended the week modestly higher after a well telegraphed cut of 0.25% in interest rates by the Federal Reserve Bank. Large capitalization stocks outperformed value stocks which were affected by the oil price volatility following attacks on Saudi production facilities.

Weak Macroeconomic Data Will Lead The FED To Cut Rates This Month

Falling global demand for capital goods, political uncertainty and structural headwinds facing the auto sector is expected to drive GDP growth to 0.5%. 

A Definitive Sector Rotation Is Not Apparent Yet

In Europe, major indices were pressured lower after the flash manufacturing PMI data for Germany recorded its worst reading in over a decade at 41.4.

Weakening Economic Data Forces A Partial US China Trade Deal

After 18 months of conflict, the US and China reached a partial deal under which the former will refrain from implementing new tariffs which were scheduled for this week.

A More Aggressive ECB Could Spark A Synchronized Global Recovery

In the UK, there seems to be no consensus in parliament on the Brexit agreement secured by Prime Minister Johnson last Friday. It is therefore likely that we are moving towards an extension of the October 31st deadline.​​​​​​​

US Earnings Boost Investor Sentiment

While the blended earnings decline for the quarter is 3.7%, it was not a surprise that companies generating over 50% of their revenue from the US had stagnant earnings growth (-0.8%).

76% Of S&P Companies Report Better Q3 Earnings Than Was Estimated

Factset data shows that three out of four companies have reported better earnings than was estimated by analysts. So far 71% of companies within the S&P500 have reported and the current forward P/E ratio of 17.2 is higher than the five year average of 16.6.

US Retail Sales Looks Set To Maintain Its Growth Trajectory

The yield on the 10 year treasury rose to its highest level since July and the spread with corporate bonds fell suggesting that the fears of a recession had receded.

US Growth Stocks Continue To Outperform Their Value Counterparts

FED Chairman Powell’s appearance before the House budget committee revealed that further interest rates cut could be on pause for now as there were no signs that the slowdown in manufacturing was spilling over to the services sector.

Global Growth Remains Soft But Is Improving

There was better news on the manufacturing front in Europe as preliminary estimates of the IHS Markit Manufacturing PMIs showed sequential improvement in Germany even if it remained below the 50 level indicative of a contraction.

Global Rating Agencies and South Africa:  Everything You Need To Know

At it's core "... sovereign ratings are mostly influenced by per capita income, government income, real exchange rate changes, inflation rate and default history."  There is a further emphasis on the importance of corruption..

The US And China Are Driving Global Growth

Within the S&P500 it was noticeable that the Utilities sector led gainers and the small cap Russell 2000 gained nearly 2% and is just under its August 2018 highs. The energy sector was the only one which ended in negative territory with a loss of 1%.

Corona Virus Epidemic Clouds Positive Economic Data

News of the first victim from the corona virus in Seattle affected investor sentiment. Stock in the tourism, airline and gaming sector fell as investors looked for short term safe haven instruments.

Manufacturing PMIs Shows That European GDP Growth Is Improving

Although economic data releases remained positive and corporations reported strong earnings, investors continued to worry about the effects of the corona virus outbreak.

Corona Virus Containment News Boost Investor Risk Sentiment

Although the number of infected cases increased to over 40,000, the progression of daily new cases slowed and contagion outside of the Hubei province appeared to be limited.

Strong Rebound In Chinese Stock Market Continues

The Chinese Central Bank issued its quarterly Monetary Policy Report in which it is estimated that the magnitude and duration of the virus on the economy will be limited. The central bank cut interbank lending rates, reduced medium term lending rates to its lowest level since 2017 and also cut the prime lending rate.

Analysts’ Estimates For US Corporations Remain Bullish

European stocks also advanced but the FTSE100 was little changed following the abrupt resignation of Sajid Javid, the Chancellor of the Exchequer after a disagreement over fiscal rules which the government wants to relax.

We've Changed Our Name. But Not Our Passion.

A legacy develops from a life dedicated to self-reflection and purpose and with our purpose passionately upheld by our phenomenal team, we took a moment to reflect on our message, our value proposition, our culture and we made some changes.

Spread of Covid 19 Virus Forces Central Bankers To Turn Dovish

According to Deutsche Bank Global Research, this was the fastest correction in history. If the virus had been only a Chinese issue, the impact would have been restricted to supply chain disruptions and an insignificant hit to global GDP growth.

Virus, Financial Markets and GDP Growth - What's Next?

Officials from the World Health Organisation claimed that 90% of China’s response to the virus was ensuring adequacy of health infrastructure, identifying those who had been in contact with infected people and keeping them under surveillance, and the lockdown of cities when required.

Covid 19 - The Situation Should Improve Significantly In May

The radical uncertainty around this virus will affect private demand even if the base case scenario for Western Economies is a technical recession during the first half of the year followed by a rebound in the final part of the year.

A legacy of unity... continued

As we go into lockdown, we are reminded of the brilliance of our country and our people.

Covid 19 - The Situation Should Improve Significantly In May

The radical uncertainty around this virus will affect private demand even if the base case scenario for Western Economies is a technical recession during the first half of the year followed by a rebound in the final part of the year.

Can Policymakers Limit The Infection Rate?

During last week, stocks rebounded from 3 year lows; on
Tuesday the DJIA had its best day since 1933 and the
S&P500 since 2008.

Slowing Infections Rate Will Boost Short Term Confidence

Stocks remained volatile and registered their worst quarterly performance since 2008. However an expansion in the manufacturing Purchasing Managers’ Index for China provided relief that other economies could rebound successfully from the contraction due to the lockdowns.

Labour Market Weakness Forces US FED To Act

After suffering heavy losses since March, equity indices rebounded during the past week. It is unclear yet if this is a bear market short squeeze as it happened at a time when macroeconomic data has started to deteriorate sharply.  There seems to be two catalysts for the improved sentiment...

Highest Ever Monetary Easing By FED Stabilizes The S&P500

Growth stocks had an edge over their value counterparts and the technology sector led gains after positive results from chipmakers and leaders Microsoft and Apple. 

Oil Price Goes Negative And Then Rebounds

Rating downgrades are spreading and analysts revised their estimates for both Alphabet and Apple lower last week. High yield bonds remained volatile in the US and in Europe. The energy sector has a large weight in high yield indices and the number of bankruptcies has reached its highest level in a decade.

Lower Base Effects Will Be A Tailwind For Growth In 2021

Within the S&P500, the cyclical segment led with the technology sector gaining most as shares of Apple rose; small capitalisation indices also rebounded but the Utilities and Real Estate sectors lagged.

US Technology Companies Show Continued Resilience

Investors were looking for new drivers to determine the direction of markets last week. As the relatively positive news flows from earnings season and the easing of lockdown measures subsided, bearish sentiment returned and major indices ended the week in the red.

US Markit Services PMI Indicates A Rebound In Activity

The communications segment was boosted by a gain in the
shares of Facebook and the discretionary sector benefitted from a rebound in the shares of travel related companies.

Major Indices Rise Further As Economic Outlook Improves

Major indices rose for the second week in a row. Within
the S&P500 a mix of defensive and cyclical sectors were
the better performers. Financials, Materials, Real Estate
and Utilities were the four sectors to gain over 5%
during the week.


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