Weekly Analyst Update — March 25th
Pullbacks will come, but have no fear
Market pullbacks come with the rally territory and shouldn’t be feared. Especially now. The S&P 500 averages 2–3 modest pullbacks a year and an average 14% intra-year drop. There is significant cash on the sidelines to buy into any significant pullback, and the twin rally pillars of rate cuts and recovering profits remain firm. Bigger risks are a stumble from the super-sized US and tech or end of immaculate disinflation.
Fed drives restart of stocks rally
US stocks rally resumed after two week pause w/ FOMC’s ‘dovish hold, in a huge week for central banks. JPY weakened even as the BoJ raised interest rates for the first time since 2007. Whilst SNB became the first major bank to cut. China Jan/Feb growth data positively surprised. AAPL sued by the DoJ. TSLA raised prices. RDDT IPO surged. KER.PA luxe miss likely one-off. See 2024 Outlook HERE and twitter @laidler_ben.
Buybacks and dividends coming back to style
2023 underperformance to narrow as profits recover and rate cuts near. Co’s biggest buyer of US stocks and dividends driving cash returns in the rest of the world. @DividendGrowth.
Spin offs return to fashion
Unilever to Holcim look to create value by de-merging, following GE’s success, even as spinoffs have mixed record and conglomerates, big tech to private equity, make comeback.
Turnarounds are difficult
Charlie Munger complained how hard company turnarounds are, and data backs, despite their popularity with investors. Buying the bond ‘fallen angels’ is more profitable.
Winners and losers from cereal’s rout
Wheat, corn, soybeans that third of global calorie consumption plunged as harvests rebounded, Is a relief to consumers and inflation, but a problem for farmers and their suppliers.
Crypto succumbs to profit taking
Bitcoin (BTC) below $70,000 on profit taking after asset-class leading rally. Spot Bitcoin ETF inflow cooled. 30 dys until 4-year Bitcoin supply halving event. SOL driven by Slerf boom. DOGE by COIN plan to list futures. Blackrock (BLK) to launch the first tokenised fund on the Ethereum (ETH) network. See latest Weekly Crypto Roundup.
Stealth commodities recovery slows
Commodities are up 5% from Feb. low on China stimulus, lower interest rate outlook, and stabler US dollar. Gold rallies on macro relief. Brent oil firm at a 4-month high of $85/bbl. on lower US inventories. Epic cocoa surge breaks $8,500/t, near twice prior high. Uranium is a weaker outlier as utilities push back on high prices.
The week ahead: PCE, Q1/Q2, Easter
1) Fed-favourite Feb. US PCE inflation (Fri) stall, Fed speakers wk. after the FOMC reiterated 3-cuts. 2) Slow earnings week ahead of April 12th Q1 start. HM-B.ST, MKC, FLTR.L, CTAS, PAYX, BYD, ANTA. 3) Fri end of strong March and Q1, and Q2 start. 4) Short week of Fri/Mon Easter holidays in US, UK, EU. UPS investor day. ADBE event.
Our key views: Outlook for a different 2024
We see a stronger but very different 2024. Lower inflation and coming interest rate cuts as growth slows, and the earnings outlook idiosyncratically accelerates. Will drive an investor rotation from 2023 US and big tech winners to rate sensitive losers from Europe to real estate.
Written by a team of experienced financial analysts at eToro.
This content is for information and educational purposes only and should not be considered investment advice or an investment recommendation. Past performance is not an indication of future results.
