📈 5 Things You Need to Know to Start Your Week

23rd September, 2024

September 23, 2024

Five Things to Start Your Week

Good Evening Investors,

Our Alpha Portfolio is at +7.91% YTD.

  • Leading: Silver at +28.9%

  • Lagging: Agilent Tech at -2.4%

Market Snapshot

Last week’s heat map shows a mixed performance across global markets with notable strength in tech and financial sectors, while pharmaceuticals and select energy names face headwinds.

  • TSMC continues to shine with a 3.41% gain, reflecting ongoing strength in semiconductors amid robust demand for advanced chips.

  • Alibaba (+7.70%) and Pinduoduo (+4.94%) lead gains in Chinese tech stocks, driven by renewed investor optimism and positive market sentiment.

In financials, HSBC (+3.01%) and TD Bank (+1.79%) are up, indicating stability in the sector, while MUFG posts a moderate gain of 0.53%.

European markets are mixed, with SAP up 3.10% on strong earnings momentum, but AstraZeneca slips 2.38% amid sector-specific pressures.

Energy stocks show mixed signals; BHP edges up 1.84%, while Brazil’s Petrobras dips 1.69%, highlighting volatility in commodity-driven markets.

Macro Trade Idea:

Long Chinese Tech, Short Pharmaceuticals

  • Long Alibaba (+7.70%) as Chinese tech stocks rebound on easing regulatory concerns and positive sentiment towards growth.

  • Short AstraZeneca (-2.38%) and other pharmaceutical stocks that are underperforming due to pricing pressures and slower growth, balancing the portfolio with defensive exposure against broader market volatility.

Rate cuts: so far so good

US stock futures pointed to a slightly higher open with indexes hovering near record highs after the Fed’s outsized rate cut last week and as traders look forward to speeches from Fed officials for fresh insight on the pace and scope of further easing. The euro retreated and German bond yields fell after a lower-than-expected French services PMI reading, while in Asia, stock benchmarks climbed after China announced plans for a rare economic briefing Tuesday and cut a short-term policy rate.

This Week’s Alpha Picks

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China Stimulus

Meanwhile, China announced plans for a rare briefing on the economy just as it cut one of its short-term policy rates, fuelling speculation officials are preparing to ramp up efforts to revive growth. The moves bolster expectations for the PBOC to lower rates after the Fed’s cut eased pressure on China to defend its currency. After disappointing data in August, there are concerns that the world’s second-largest economy could miss its annual growth target of around 5% without more support.

Newsworthy

This is what’s caught our eye over the weekend.

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

A week after the Fed rate cut. Here's a chart of the 2-10 yield spread.

The 10-year yield has gone up a touch since the Fed decision last week, and what's important to remember is that this is perfectly consistent with Fed easing. Some people get confused by this. They think the Fed easing and lower rates are synonymous. But to some extent, this is a misconception.

The simplest thing to think about is that if we had some kind of massive shock tomorrow, harming the economy, you'd almost certainly expect the 10-year yield to collapse. Or think about the 2010s, after the Great Financial Crisis. Inflation was very mild. Employment growth was mediocre, and rates fell through most of the decade. Just going on the economic targets alone, the implication is that for many of those years, the Fed was too tight. And that's why yields at the long end of the curve kept falling.

Anyway, it'll be a decent week for economic data. Nothing too massive. But today we get the S&P Services and Manufacturing PMIs. Tomorrow, we get Philly Fed Non-Manufacturing, Richmond Fed, and the Conference Board confidence data. Later this week we'll also get Initial Jobless Claims, the latest reading of Q2 GDP, and then Core PCE, which we know matters a lot to the Fed.

Should be another interesting week.

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

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