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SP500 is now 1.2% away from making an all time high. If (or when) that happens, it will be the 2nd time in history after 1983 that the wide market makes a new all time high during a recession (I wrote about the reasons of such equity markets behaviour here as I rebalanced the GLP at the end of July). As we have now entered August, it must also be stated that this year (at least so far) the markets behave differently than usual. August-September are often not that great for equities historically (average 0.6% gain in August and 1% loss in September for data going back to 1928).
-> A breakthrough on the next coronavirus bill was still awaited by the market. So far we have seen no deal, although it is pretty clear that both sides of the US political front want it.
-> From the very start of the week big-tech stocks led the gains in general.
-> Among the biggest outperformers last week was Microsoft (MSFT), which announced that it was in talks to take over the US operations of TikTok after President Trump said he might look to back TikTok in US due to its Chinese connections – same old story goes on and on. MSFT ended +3.6% on week.
-> On the move were also names like: Nikola (NKLA) and Nio (NIO) – both electric vehicle makers (NKLA still in the yet-to-deliver phase) gaining a lot of interest recently as the sector’s story is very hot; Booking.com (BKNG), Amazon (AMZN) – both added biggest amount of points to the SP500 last week.
-> On Wednesday the ADP July jobs repot showed a much smaller than expected private payroll number (167k vs. 1m expected), but was balanced by a huge positive June revision to 4.3m from 2.4m. The market reacted mixed to positive at end of day.
-> The reporting season for the 2q20 is now mostly over now. 443/498 SP500 companies have already reported. Average Sales surprise +1.6%, average earnings suprise is as much as +22.6% – expectations were dumped and it was easy to beat this quarter.
-> Culmination of the week was the Friday payrolls data, which came out as follows:
-> Also, what’s striking, is that markets are still supported by a massive new army of investors (or traders), consisting of people (especially younger), who come to the stock markets, as rates are practically zero throughout the world. I wrote about it here. This trend is very worrying.
-> Biogen (BIIB) – one of our GLP holdings – and Japan’s Eisai said on Friday the U.S. Food and Drug Administration has accepted their marketing application for experimental Alzheimer’s disease treatment aducanumab. BIIB surged on the new ending +11.3% on week.
-> Effective weekly index changes: S&P500 +2.45%, Nasdaq +2.5%, EuroStoxx600 +2%, DAX +3%, Nikkei225 +2.9%.
Other markets events:
-> Bonds: US yield curve (10y-FF) was flat on week at 0.45%, German curve (10Y Bunds-3M) stays at 0.04 with 10Y Bunds at -0.51%, not much action in High Yield Spreads at around 5.
-> Commodities (ex oil): Gold is still the star of markets and ended this week +2.6%.
-> Currencies: DXY (Dollar Index) 0.0% on week, EURUSD +0.06% – not much action, but USD stays vulnerable.
Major macro events: (times are CET):
Next Week’s major macro events:
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