COPIERS AND FOLLOWERS UPDATE
Hi everyone, another update from me as stocks slip back a little and take a breather, whilst the conflict in Iran continues to rumble on.
The S&P 500 slid nearly 2% on the week with the Nasdaq falling by more than 4.5%, with much of the weakness coming from investors questioning whether AI-related valuations have become stretched after a very strong rally earlier in the year. Large-cap technology companies and semiconductor stocks have seen particularly heavy selling, although the move has been more of a rotation than a broad market panic.
Another key factor from the last few weeks has been the latest Federal Reserve meeting with their new chair, Kevin Warsh. Rather than side with Trump and announce interest rate cuts, policymakers at the Fed ruled out the expectation of a rate cut later in 2026. Updated forecasts showed greater concern about inflation, with some officials now seeing the possibility of another rate increase if inflation remains elevated.
Whilst I think this is sensible thinking, especially as inflation risks are elevated at present, the markets nevertheless don't tend to welcome the prospect of rate increases, so this has further added to stock weakness recently.
Recent economic data has been mixed but generally supportive, with encouraging data supporting a positive outlook on the U.S. Recent reports showed that weekly jobless claims remained relatively low and unemployment keeping steady at around 4.3%. Hiring has slowed somewhat but there is little evidence of a sharp deterioration in the labour market.
This has created a dilemma for investors, as good economic data supports corporate earnings, but it also makes it more likely the Fed keeps interest rates higher for longer.
For us, we are sticking with our more defensive positioning for now until there is a little more clarity in market direction. The market's near-term direction is likely to depend on the next U.S. employment report, along with inflation data and therefore whether the Fed signals further tightening. The continuing situation in the Middle East is also something I will be keeping a close eye on and of course any updates in the portfolio I will keep you promptly up to date with.
Thanks again and enjoy the week ahead!
Best wishes, Richard.... Show More
Not investment advice. The author may have financial interests in the mentioned instruments.
Copying this guys since 04th of July 2021. Still at -6%. S&P grew 71% since then. Stay away! 🙃 ... Show More
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