Summary
Retail voting power set to rise
Its time for retail investors to have say as enter the peak annual general meeting (AGM) season. It decides everything from board membership to pay and dividends. Upcoming Tesla, JPM, NVIDIA meets, after big vote wins and losses from HSBC to Starbucks. Weaker markets and proactive regulators are driving more AGM votes. Retail investors usually under-represented, but scale and technology may now change.
Debt ceiling stand off outweighs less inflation
US debt ceiling standoff and tighter bank lending standards offset 10th fall in US inflation. Tech-led Growth stocks, Bonds and US dollar all gained, whilst Commodities and Value fell. China imports plunged 8% and BoE hiked for 12th time. DIS fell on streaming subs losses, and PANW on deposit outflows. GOOG rose as added AI to core search function. See our Q2 Outlook HERE. Video updates, twitter @laidler_ben.
Underlying US inflation pressures easing
US headline inflation fell for 10th month to 4.9%, vs 9.2% June peak. Our forward-looking indictor shows pressures still easing. Is key to Fed staying on hold and eventually cutting rates.
Europe’s Q1 earnings support its rally
UK and Europe’s stocks growing Q1 earnings 7% led by rebounding profit margins, the opposite of US. Supports world-leading stock performance this year. @EuropeEconomy.
The biggest election of the year
Turkey voted for a new President and parliament May 14 in most important world election of year. Lira (TRY) in focus after 80% loss past five years. BBVA leads foreign stock exposure.
The ‘miracle bean’ in focus
Soybeans and oil and meal by-products world’s 2nd biggest after oil. ‘Miracle bean’ price pressure seen from plunging ‘crush spread’.
Bitcoin hurt by renewed market volatility
BTC fell sharply toward $26,000 on broad market volatility and dollar strength. MATIC and AVAX led big-coin weekly falls. Legal action saw US Congress regulation hearing and SEC extend MARA probe. HUT Q1 sales plunged on electricity dispute. Coming Bitcoin2023 Miami event, includes MSTR and BitMEX speakers.
Commodities now down 10% this year
Asset class under renewed pressure from global growth fears and stronger US dollar, as Brent crude eased under $75/bbl. Grains watching for 60-day extension to Black Sea Grain Initiative, whilst OJ fell back from all-time highs. Lithium price firmed after Chile nationalisation plan and $10 billion LTHM and AKE merger.
The week ahead: Big retail, China tech, BTC
1) WMT, HD, TGT plus DE, CSCO end decent Q1 US earnings. Also BABA, Tencent, BIDU results. 2) Big China retail sales and IP rebound (Tue), plus resilient US retail sales. 3) Turkey election result (14th) to G7 Summit politics. 4) Biggest Bitcoin event (18th) of year from Miami.
Our key views: Accelerated macro outlook
Banking fears doing Fed’s job for it, and debt ceiling also. Accelerating GDP and inflation slowdown and interest rate peak. See market recovery with bumps in road. Slowdown hurts earnings. Low yields help valuation. Focus cheap and defensive assets from healthcare to big tech. More cautious on cyclicals and banks.
Top Index Performance
| 1 Week | 1 Month | YTD | |
| DJ30 | -1.11% | -1.73% | 0.46% |
| SPX500 | -0.29% | -0.33% | 7.41% |
| NASDAQ | 0.40% | 1.33% | 17.37% |
| UK100 | -0.31% | -1.49% | 4.06% |
| GER30 | -0.30% | 0.67% | 14.29% |
| JPN225 | 0.79% | 3.14% | 12.62% |
| HKG50 | -2.11% | -3.97% | -0.78% |
*Data accurate as of 15/05/2023
Market Views
Debt ceiling stand off outweighs lower inflation
- The US debt ceiling standoff and tighter bank lending standards offset a 10th fall in US inflation. Tech-led Growth stocks, Bonds, and US dollar all gained, whilst Commodities and Value fell stocks. China imports plunged 8% and BoE hiked for 12th time. DIS fell on streaming sub losses, and PANW on deposit outflows. GOOG rose as added AI to search function. See our Q2 Outlook HERE.
Underlying US inflation pressures easing
- April US headline inflation narrowly fell for a 10th straight month to 4.9%, from a 9.2% peak last June. Shelter price rises, which make up third of the index, fell for the first time in two years. Food, energy, and used car prices all decelerated. Core inflation also modestly eased, from 5.6% to 5.5%.
- Our inflation indicator (see chart) shows near-all price pressures still easing, with only 2 of our 13 indicators up MoM. Whilst coming May and June inflation reports have easy comparables. This inflation progress is key to keeping a data dependent Fed on pause at 5% and to it cutting interest rates later in the year.
Europe’s Q1 earnings support its rally
- UK and Europe’s stocks on track to grow earnings by 7% in Q1. This continued resilience led by rebounding profit margins, the opposite of US, and supports Europe’s world-leading stock performance this year. Investment risks remain higher in Europe than elsewhere, with still slower economic growth, slimmer profit margins, and more cyclicals and global-focused stock markets.
- But the region continues to see relative support from its 30% lower P/E valuations compared to the US. And with still lower earnings growth forecasts (see chart) than the US despite the latest Q1 results beat. See @EuropeEconomy.
The biggest election of the year
- Turkey voted for a new President and parliament on Sunday, May 14. The Presidential winner needs 50% of the vote to avoid a May 28 run off. It’s likely the most important world election of this year. President Erdogan and the AK Party have been in power for 20 years and face Kemal Kilicdaroglu. He leads a united opposition that pledged to restore Central Bank independence, reverse unorthodox economic policies, and improve US relations.
- Turkey suffered from weak economy and Lira, and worsened by February’s earthquake. The currency (TRY) is investment focus, down 80% vs dollar past 5 years, and market pricing weakness.
The ‘miracle bean’ in ag focus
- Ag is 30% commodity markets by trading and production. Soybeans and oil and meal by-products are world’s 2nd biggest after crude oil. This ‘miracle bean’ is high in protein and low in saturated fat and used for endless human food and animal feeds.
- Prices pressured as supply ramps in big producers Brazil, US and largest buyer China seeks contain import needs. Also hurt soybean ‘crush spread’ and stocks from BG to ADM. Supply uncertainty may rise with chance El Nino hitting yields.
US inflation lead indicators versus peak
Bitcoin hurt by broader market volatility
- Bitcoin (BTC) fell sharply towards $26,000 with broader markets volatility. It remains up over 60% this year. With the largest big-coin losses seen last week by MATIC and AVAX.
- Regulatory action saw the US Congress hold a rare joint House committee hearing on potential regulation, whilst the SEC extended its probe of related party transactions at miner MARA.
- Elsewhere miner HUT saw Q1 revenues slump over 60% on an ongoing energy dispute. Whilst the bitcoin2023 conference in Miami includes MSTR’s Saylor and BitMEX co-founder Hayes.
Commodities prices now down 10% for the year
- The broad based Bloomberg Commodity Index fell further, under pressure of renewed global growth concerns and a stronger US dollar. This took its decline this year to 10%, the most of any asset class. Saw brent prices fall under $75/bbl., despite US strategic oil reserve rebuild plans.
- Grains are watching for a 60-day extension to the Black Sea Grain Initiative which expires on the 18th and allows ag exports from both Ukraine and Russia, and is contributing to recent price easing. Elsewhere, OJ prices eased from all-time highs.
- Lithium prices, used across battery and EV supply chain, firmed, after dramatic price plunge this year. With Chile move to nationalise its industry. Week saw big $10 billion LTHM and AKE merger.
The week ahead: Buffett, inflation, BoE, earnings
| 1 Week | 1 Month | YTD | |
| IT | 0.83% | 3.67% | 22.64% |
| Healthcare | -1.08% | -0.69% | -1.98% |
| C Cyclicals | -0.10% | 2.09% | 13.05% |
| Small Caps | -1.08% | -1.85% | -1.16% |
| Value | -1.13% | -2.42% | -3.33% |
| Bitcoin | -11.56% | -12.77% | 57.77% |
| Ethereum | -11.26% | -7.47% | 47.25% |
Source: Refinitiv, MSCI, FTSE Russell
The week ahead: Big retail, China tech, Bitcoin
- The final week of US Q1 earnings see’s ‘big retail’ WMT, HD, TGT plus DE, CSCO and China’s tech heavyweights BABA, Tencent, BIDU. Also see the annual general meetings at TSLA and JPM.
- The economic data focus on China’s faster April rebound, with retail sales est. +20% and industrial production +10%. Als firmer US retail sales (Tue), as proxy for 2/3 the economy, up est. 0.7% MoM.
- The politics focus is on the G7 leaders summit in Hiroshima, from US debt ceiling to Ukraine war. Alongside the Black Sea Grain Initiative deadline (18th), and aftermath of Turkeys key election (14th).
- Also see the biggest bitcoin2023 conference from Miami (18-20th). Plus continued US debt ceiling negotiations between President Biden and House Republicans as near June ‘X-date’ default deadline.
Our key views: An accelerated macro outlook
- Banking sector fears are doing the Fed’s job for it. By accelerating the GDP and inflation slowdown and the interest rate peak. Comes alongside the lagged 5% interest rate impact and debt ceiling impacts on financial conditions and gov. spending..
- See a V-shaped market recovery with plenty bumps in road. Faster slowdown hurts earnings. But lower bond yields helps valuation. Focus on cheaper and more recession defensive assets, from healthcare to derated big tech. More cautious on assets most exposed to recession risk, like cyclicals, small caps, and commodities. Or lower yields, like banks.
Fixed Income, Commodities, Currencies
| 1 Week | 1 Month | YTD | |
| Commod* | -1.72% | -6.16% | -10.30% |
| Brent Oil | -1.59% | -14.38% | -13.75% |
| Gold Spot | -0.46% | -0.10% | 10.14% |
| DXY USD | 1.47% | 1.14% | -0.79% |
| EUR/USD | -1.50% | -1.28% | 1.40% |
| US 10Yr Yld | 2.83 | -5.14 | -41.14 |
| VIX Vol. | -0.93% | -0.23% | -21.41% |
Source: Refinitiv. * Broad Bloomberg index. * Basis point
Focus of Week: Shareholders set to have their say
The time to have your say in how the companies you invest in are managed
With just retailers left to report US Q1 earnings, the focus is shifting to shareholder voting season. The two months of peak (see chart) company annual general meetings. This is one of the most important ways investors can influence how a company is run, from pay to policy. Retail investors have traditionally been under-represented here but a combo of their greater size, interest, and ease of voting may change this.
Annual general meeting decides everything from the board membership to pay and dividends
The Annual General Meeting (AGM) is a formal meeting between a company’s shareholders and the board of directors who supervise the company on their behalf. The AGM must be held annually and within six months of the end of the financial year. They decide everything from board membership and executive pay, through to dividends and ESG policy, and consider proposals from lobbying transparency to gender pay gaps. Increasingly AGMs are also seeing opposing shareholder proposals, like both pro and anti ESG.
Tesla to NVIDIA AGM’s coming with significant proposal win and losses already seen
AGMs are back to face-to-face rather than the virtual events of Covid. They range from the small to last weekend’s giant 40,000 Berkshire Hathaway ‘Woodstock for capitalists’. The next include Tesla (May 16), JP Morgan (May 16), Amazon (May 24), Meta (May 31), Exxon (May 31), Alphabet (June 2), and NVIDIA (June 22). Recent ones seen HSBC defeat a spin off its Asia business and Starbucks lose one against anti-unionisation.
Weaker markets and more proactive regulators are driving more AGM proposals and votes
Investors are flexing their muscles with more proposals being submitted. This is driven by weaker markets and economic uncertainty that encourage more proactive investors. Also, by more demanding regulation like SEC’s ‘pay versus performance’ disclosure rule and universal proxy requirement. The 2022 season was characterized by an increasing ESG focus at US stocks and more contested pay resolutions in Europe.
Retail investors have traditionally been under-represented, but may be set to change
Retail investors have a key role to play. They have traditionally punched well below their weight. With their voting participation low, at an average 29% of shares owned versus 82% for institutions. The significantly increased number of self-directed retail investors in recent years, and greater convenience of voting should see their impact rise. Etoro is making voting easier. Our global investor beat survey shows 73% of shareholders are interested in voting. With greatest concerns dividends (49%) and executive pay (33%).
Peak US Annual General Meeting time (Number)
Key Views
| The eToro Market Strategy View | |
| Global Overview | Aggressive Fed interest rate hiking cycle, stubborn inflation, and now financial sector concerns, is accelerating our 2023 view. Of a quicker GDP slowdown, lower inflation, and a peaking Fed interest rate cycle. Will pressure earnings further but also lower bond yields and take pressure off de-rated valuations. We are invested, believing Oct 2022 was the low, and focus on cheap and defensive assets for a faster ‘V-shaped’ market recovery. See our Q2 Outlook HERE |
| Traffic lights* | Equity Market Outlook |
| United States | World’s largest equity market (60% of total) seeing slowing but resilient GDP and earnings growth. Valuations led the market rout, and now at average levels, and are supported high company profitability and near peak bond yields. Focus on cash-flows defensives, like healthcare and high dividend. Big-tech supported by defensive growth. See gradual ‘U-shaped’ rebound as inflation slowly falls and de-risks market and tech/small cap/crypto appetite. |
| Europe & UK | Favour defensive and cheap UK (‘Economies not stock-markets’) and continental European equities. Recession risk easing with lower natgas prices amd reopening China with high ‘buffers’ of rising fiscal spending (defence and refugees) and weak Euro (50%+ sales overseas). Even as ECB hikes aggressively. Equities cushioned by lack of big tech sector and 30% cheaper valuations vs US. Banks better capitalised and regulated but loans/GDP much higher. |
| Emerging Markets (EM) | China, Korea, Taiwan dominate EM (60% wt.), and more tech-centric than US. Positive on China as economy reopens, cuts interest rates, and eases tech regulation crackdown. Valuations 40% cheaper than US and market out of favour. Recovery helps global sectors from luxury to materials. Broader EM needs weaker USD and peak US rates catalyst. |
| Other International (JP, AUS, CN) | Canada and Australia benefit from strong equity market weight in commodities and financials, if global growth resilient and bond yields risen. Japanese equities among worlds cheapest but threatened by tightening monetary policy and stronger Yen with rising inflation and new BoJ governor. |
| Traffic lights* | Equity Sector & Themes Outlook |
| Tech | ‘Tech’ sectors of IT, communications, consumer discretionary (Amazon, Tesla), dominate US and China. Hurt by higher bond yields and above average valuations. But structural stories with good growth, high margins, fortress balance sheets support some. ‘Big-tech’ attractive new recession defensives. ‘Disruptive’ tech is much more vulnerable. |
| Defensives | More attractive as macro risks rise and bond yields better priced. Consumer staples, utilities, real estate attractive defensive cash flows, less exposed to rising economic growth risks, and robust dividends. Offset impact of higher bond yields. Healthcare most attractive, with cheaper valuations, more growth, some rising cost protection. |
| Cyclicals | High risk cyclical sectors – like discretionary (autos, apparel, restaurants), industrials, energy, materials, and small caps – have cheap valuations, many with depressed earnings, and have been out-of-favour for many years. But they are significantly exposed to rising recession risks. Some especially cheap (energy) or see growth recovery (airlines). |
| Financials | Current stresses likely individual not systemic. Post GFC reforms boosted capital and size/speed of authorities response. But outlook for 1) less GDP growth, 2) lower bond yields and interest rates, and 3) valuation sensitivity after recent surprises, worsens outlook. Insurance and Diversifieds (like Berkshire Hatheway) more defensive. |
| Themes | Dividends and buyback themes attractive with resilient cash flows, rising pay-outs, and investor search for defensives. Power of compounding dividends under-estimated, at up to 1/2 of total long term return. Small caps pressured by rising recession risk. Secular growth of Renewables and Disruptive Tech investment themes. |
| Traffic lights* | Other Assets |
| Currencies | USD ‘wrecking ball’ driven by Fed interest rates and ‘safer-haven’ bid. DM currencies hurt by still low interest rates and struggling growth. Strong USD hurt EM, commodities, US foreign earners like tech. But helps big EU and Japan exporters. See a stabler USD outlook in 2023 as near top of the Fed cycle and global risks remain high. |
| Fixed Income | US 10-yr bond yields supported around 4% by higher Fed rate hike and stickier inflation expectations. Set to ease as recession risks slowly build and inflation expectations gradually fall. US has wide spread to other market bond yields, and headwinds of high debt, poor demographics, and low productivity. 5% bill yields an attrative cash alternative. |
| Commodities | Strong USD and rising recession fears hit commodities. But still above average prices helped by GDP growth, ‘green’ industry demand, supply under-investment, recovering China, Russia supply crisis. Oil helped by slow return of OPEC+ supply and Russia 10% world oil supply problems. But commodities not to repeat their 2022 performance leadership. |
| Crypto | Potential ‘surpsise’ after dramatic and early asset class sell-off and later specific risk events from Luna to FTX. See long term asset class development with small size $1 trillion, correlations low, regulation growing, development/catalysts continuing – Ethereum merge to proof-of-stake and coming BTC halving. |
| *Methodology: | Our guide to where we see better risk-adjusted outlook. Not investment advice. |
| Positive | Overall positive view, and expected to outperform the asset class on a 12-month view. |
| Neutral | Overall neutral view, with elements of strength and weakness on a 12-month view |
| Cautious | Overall cautious view, and expected to underperform the asset class on a 12-month view |
Source: eToro
Analyst Team
| Global Analyst Team | |
| CIO | Gil Shapira |
| Global Markets Strategist | Ben Laidler |
| United States | Callie Cox |
| United Kingdom | Adam Vettese Mark Crouch Simon Peters |
| France | Antoine Fraysse Soulier David Derhy |
| Holland | Jean-Paul van Oudheusden |
| Italy | Gabriel Dabach |
| Iberia/LatAm | Javier Molina |
| Nordics |
Jakob Westh Christensen |
| Poland | Pawel Majtkowski |
| Romania | Bogdan Maioreanu |
| Asia | Nemo Qin Marco Ma |
| Australia | Josh Gilbert |
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