Can Global Equities Sustain The Bear Grip?

With market participants appearing to embrace the manifestations of a slowing economy and easing inflationary pressures, global stocks continued to gain momentum in the past fortnight. The technology-heavy Nasdaq Composite and Small-Cap shares also did well. The S and P 500 index’s bestperforming sector was consumer discretionary, which saw gains from Amazon and Tesla, while the normally defensive healthcare and utilities sectors underperformed. In the US, the Bank of America published its Monthly Fund Manager Survey, which revealed some interesting facts.

While equities exposure was at its lowest points since the recession and global financial crisis of 2007–2009, cash holdings in funds had risen to their greatest levels since the terrorist attacks of September 11, 2001. Additionally, a record number of fund managers reported taking on less risk than usual. Additionally, investors digested several second quarter earnings’ reports, many of which showed a weakening economy, but also some stronger resilience in company profits and outlooks than many had anticipated. After the streaming giant said that it had lost fewer customers than anticipated in the most recent quarter, Netflix’ shares increased over the course of the week. The US’ stock market has sharply recovered from its June lows. 

However, during this downturn, there have been other instances of this kind of strength. Late in May, the S and P 500 gained 7.1 per cent, and in March it gained 11.1 per cent. Longer term interest rates have also significantly declined in tandem with the current upswing, with the 10-year yield decreasing from 3.5 per cent to 2.8 per cent over this time. Despite a slew of depressing economic data releases and the European Central Bank’s decision to raise interest rates for the first time in more than 10 years, European shares increased as investor confidence remained high. In the past fortnight, the pan-European STOXX Europe 600 index closed the week 2.88 per cent higher in local currency.

"Despite a slew of depressing economic data releases and the European Central Bank’s decision to raise interest rates for the first time in more than 10 years, European shares increased as investor confidence remained high."

Meanwhile, the Xetra DAX index in Germany grew 3.02 per cent, the CAC 40 index in France increased 3 per cent and the FTSE MIB index in Italy returned 1.33 per cent. The FTSE 100 index in the UK did well, returning 1.64 per cent. Japan’s Nikkei 225 index increased 4.20 per cent during the past week while the TOPIX index as a whole increased by 3.35 per cent. After China’s Premier Li Keqiang dampened expectations of excessive stimulus and signalled flexibility on China’s annual growth target, the stock markets in China had mixed results. The Shanghai Composite index, which measures the biggest listed companies in Shanghai and Shenzhen, increased 1.3 per cent while the blue chip CSI 300 index decreased by 0.2 per cent.