Bilal Hafeez, Viresh Kanabar
Dominique nailed it – the Fed finally acknowledged the US economy’s strength. The Fed stayed on hold, kept an extra 2023 hike, reduced the number of 2024 cuts from four to two, and kept the inflation trajectory unchanged but upgraded the growth trajectory.
John Tierney
Equities took a hit on concerns about a hawkish Federal Reserve (Fed), but finished the week with continued hopes that priority is still a soft landing.
Bilal Hafeez, Ben Ford
Momentum model signals sit in contrast to our view to fade CHF strength. They are also yet to get fully on board with our bullish USD basket trade (vs EUR, CHF and GBP).
Bilal Hafeez, Viresh Kanabar
ECB pulled off a dovish hike, but we see more to come. The ECB hiked by 25bps as Henry had expected for some time. They also increased their interest rate forecasts for this year and next, driven by higher energy prices.
John Tierney
Equities remain mired in a narrow trading range that began in early July. The end of summer and hot weather season may bring little relief. We see the logjam continuing until the economy breaks weaker and forces the Fed to choose between keeping the recovery going (i.e., easing) or damping inflation (i.e., higher for longer).
Bilal Hafeez, Ben Ford
Momentum models are moving towards our view that GBP/CAD will trade lower over the next six months. They also back our bias to expect European equities to underperform US equities.
Bilal Hafeez, Viresh Kanabar
The quarterly Beige Book was released last week, continuing to point to strong growth, falling inflation and a loosening labour market. Here are our highlights on each point:
John Tierney
The large cap S&P 500 and NASDAQ 100 continued their sideways slide last week, dropping about 1.4%. But the small cap Russell 2000 took a harder hit...
Bilal Hafeez, Ben Ford
Momentum models are moving towards our view that GBP/CAD will trade lower over the next six months. They also back our bias to expect European equities to underperform US equities.
Bilal Hafeez, Viresh Kanabar
US jobs data took centre stage. Last week, US jobs data dominated the market narrative, with JOLTS (Tuesday) and NFP (Friday) data pointing towards a slower labour market.
John Tierney
Equities capitalized on improved labour market news to claw back much of the August selloff. We continue to expect the (Federal Reserve) Fed will err on the side of dovishness and avoiding a hard landing, making a major selloff unlikely.
Viresh Kanabar
This month we took a deeper look into private markets, where we have been bearish for most of this year.
Bilal Hafeez, Ben Ford
Momentum models back our view to be long 10Y JGBs vs 10Y USTs (target: -400bps) and long EUR/CHF. They also back our bias to expect European equities to underperform US equities. They disagree with our view for GBP/CAD to trade lower over the next six months.
John Tierney
Inflation may be falling, but few people seem to be paying attention to the wide gap between headline inflation and still-high core inflation. Historically, headline inflation mean reverts back to core inflation, implying the Fed is more likely to raise rates to around 6%.
Bilal Hafeez, Viresh Kanabar
Powell stood his ground at Jackson Hole. Despite speculation and academic calls suggesting otherwise, Chair Powell reiterated his commitment to the 2% inflation target. He also stated that continued strong growth in the US could require additional policy tightening given inflation remains above target.
John Tierney
Are equities settling into a trading range now, or is the slide set to resume? It depends on the data.
Bilal Hafeez, Ben Ford
Momentum models are supportive of our hawkish views for both the Federal Reserve and European Central Bank. They also support Ben’s view that there is little reason to turn short EUR/SEK yet.
Bilal Hafeez, Viresh Kanabar
Last week, US retail sales beat expectations across the board. Advance retail sales rose +0.7% MoM versus +0.4% MoM expected, while the control group rose +1.0% MoM versus +0.5% MoM expected.
John Tierney
With equities down 5% or more so far in August, the slow leak is clearly becoming a slide – and a broad-based one at that.
The benefits of equity investment include capital gains and dividends. However, we also see investment in stocks as a core part of a diversified strategy alongside other asset classes such as bonds and commodities. A global equities strategy offers geographical diversification, too.
It is possible to invest in equities at an individual level, but we gear most of our research around exchange traded funds (ETFs) as these provide better, more diversified exposure to macro trends instead of company fundamentals.
For most investors, equities offer an attractive way to grow wealth over the long term. There are many types of equities. And like any asset, they can be volatile in the short term. As a risk asset, they tend to suffer during downturns or periods of bearish sentiment. Yet equity investment generally offers higher returns than bonds and cash savings in the long term.
Your portfolio allocation to equities will largely depend upon your risk appetite. If you have an aggressive risk profile, you could potentially allocate 70%. With a moderate risk profile, you could consider an allocation of 50%, while a conservative risk profile might lead you to allocate 20%.
To gain an overview of our equity market investment views, read our latest Prime Trade Ideas report.
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What Is a Stock Split?
Equity investing is money that people invest in a company by buying shares of the company on the equity market. Investing in equities allows investors to own a share of the company and profit either via a rise in the company’s value (capital gains) or the generation of dividends.
Equities in the stock market are simply shares of a company that investors and other market participants buy or sell via exchanges. There is no difference in equities vs stocks.
The market value of equity is the total value of a company’s equities expressed in its denominated currency (I.e., dollars). It is also known as market capitalization, and it is calculated by multiplying the current price of a single stock by the total number of outstanding shares.
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