📈 5 Things You Need to Know to Start Your Week

9th September, 2024

September 09, 2024

Five Things to Start Your Week

Good Morning Investors,

Our Alpha Portfolio is at +3.44% YTD.

  • Leading: Silver at +16.1%

  • Lagging: Broadcom at -15.8%

Market Snapshot

Global markets are experiencing a sharp sell-off across sectors, driven by concerns over weakening demand and macroeconomic headwinds.

Tech stocks are under significant pressure, with TSMC down 7.29%, signalling a potential slowdown in semiconductor demand, and ASML plummeting 15.20%, exacerbating concerns about the tech industry's near-term outlook. Japan's Sony also dropped 6.98%, reflecting broad tech sector weakness across Asia.

In the energy sector, Shell is down 7.74%, and BHP fell 6.78%, likely driven by concerns over lower global energy demand and softer commodity prices. The broader energy decline includes Petrobras in Brazil, down 3.47%, and Enbridge in Canada, which bucked the trend with a modest 2.10% gain.

Financials are mixed: Royal Bank of Canada (RBC) and TD Bank posted gains of 1.45% and 1.55%, respectively, while European banks like HSBC and UBS saw losses of 2.81% and 7.34%, respectively, reflecting regional economic concerns. Additionally, in the consumer sector, Lululemon experienced a sharp decline of 8.54%.

This broad market weakness points to investor concerns over slower economic growth, particularly in the tech and energy sectors, as well as volatility in financials across regions. Defensive sectors and select North American financials are relatively resilient, but the outlook remains cautious.

Macro Trade Idea

  • 30% Short in tech/semiconductors.

  • 30% Long in North American financials.

  • 40% Cash

Inflation Ahead

US equity futures point to a partial recovery as traders look toward inflation numbers due Wednesday. Stocks saw their worst week since March 2023 on Friday after data showed hiring slowed more than expected. Economists expect gains in American consumer prices to have moderated in August, which would further support the case for at least a quarter-point interest-rate cut by the Federal Reserve later this month. “The pivotal question for stock investors is whether the Fed waited too long to cut rates because recession risks are higher now than just two months ago,” said Eric Diton, president and managing director of the Wealth Alliance. “All of a sudden, inflation is no longer the big issue.”

Bitcoin Outflows

US Bitcoin exchange-traded funds have posted their longest run of daily net outflows since listing at the start of the year. Investors pulled close to $1.2 billion in total from the group of 12 ETFs over the eight days through Sept. 6, data compiled by Bloomberg show. That said, Bitcoin rallied along with other risk assets on Monday, though its year-t0-date gains have cooled to about 30%. The token will likely trade in its recent $53,000-to-$57,000 range until US inflation data on Wednesday, said Caroline Mauron, co-founder of Orbit Markets.

Newsworthy

This is what’s caught our eye over the Bank holiday Monday.

And finally, here's what Ali’s interested in this week

On Friday, Bloomberg's Josh Wingrove reported that some Biden aides have been quietly working on a proposal for a sovereign wealth fund, of sorts, for the United States.

Every once in a while, you hear people say that the US should use its financial might to start buying up equity stakes in companies in the same manner as, say, Saudi Arabia or Norway. Frequently, though not always, sovereign wealth funds are associated with national economies dominated by energy exports. Donald Trump has talked about a US sovereign wealth fund as well on the campaign trail.

Anyway, reading through Wingrove's report, I think this is the key issue:

"Countering US adversaries’ grip on critical materials and emerging technology is a key motivator of the project, and aides are particularly concerned about being able to tap capital at the pace and scale of other countries. The China Investment Corporation, for example, has made substantial investments in natural resources, leveraging the country’s foreign exchange reserves."

To me, this sounds distinct from how people usually conceptualise these funds. It doesn't sound like the vision here is to build a huge lump of assets that would generate steady cash flows, or be used to stabilise the currency, or anything like that.

What this sounds like is that the government perceives a need to make investments in critical areas (such as minerals, or batteries, or semiconductors, or something else) and that it lacks good vehicles to directly make these outlays.

Why is it relevant? Think of the impact this type of ‘buying’ would have on the market over the coming months and years. Roaring 20s?!

On that note, have a great week.

Ali is the Editor of The Insider Memo, Follow him on X @ASAInsights

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