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Lloyd Adams, of Team Asset Management, offers this week’s market review
THE UK experienced a pivotal moment in political history this week. Labour’s landslide victory came as little surprise to financial markets, which have had a turbulent relationship with the Conservative party since the UK government bond crisis almost two years ago.
Following the UK election result, Goldman Sachs has upgraded the country’s growth forecast for the economy. The investment bank now predicts a modest boost in demand growth, raising its gross domestic product forecasts for 2025 and 2026 by 0.1 percentage points to 1.6% and 1.5%, respectively. UK financial markets also responded positively, notably boosting household goods and home construction stocks such as Persimmon and Taylor Wimpey.
Global stocks reached all-time highs, as the momentum trade in US growth stocks reaccelerated. The technology-heavy NASDAQ and the large cap S&P 500 pushed their record levels higher again. For the NASDAQ, it was the tenth positive week out of the past 11.
The tailwind for risk assets followed a series of softer economic readings in America last week, suggesting improved odds of a late summer rate cut. This includes the US manufacturing and service sectors, as well as the crucial US jobs data, which have revealed a moderate slowdown in the labour market. June’s gain of 206,000 jobs exceeded economists’ consensus forecast for around 190,000, but a rise in unemployment to 4.1% left the jobless rate at the highest level since November 2021.
All of this taken together revives hopes that the Federal Reserve will start cutting interest rates soon, with a 70% probability that the first cut will occur in September.
European stocks rose, despite a volatile period for French financial markets over fears that Marine Le Pen’s “hard right” National Rally party would triumph and secure an outright majority. French markets dropped slightly on Monday following election results of a hung parliament, suggesting a worst-case scenario has been avoided, but with the prospect of extended political gridlock ahead. No individual party secured an outright majority; Macron’s centrists landed second, with Le Pen and her allies coming third.
In corporate news, Tesla is on track for a positive 2024 after a seven-day winning streak added $200 billion in market value. Another standout performer is the retailer Macy’s, which rallied following reports of a $6.9 billion private equity buyout.
Ford announced increased second-quarter sales by 1% on last year. The company achieved its best second-quarter performance in truck sales since 2019, while electric vehicles saw a 61% increase from the previous year. Additionally, hybrid sales experienced a robust growth rate of 56% during the same period.
Jeff Bezos disclosed a plan to sell an additional 25 million shares of Amazon.com, worth $5 billion, on the day the stock reached a new record high. Earlier in February, he sold about $8.5 billion, marking his first stock sale since 2021. This brings his total sales for the year to a staggering $13.5 billion.
A brief review of commodities shows that gold is on track for consecutive weekly gains because of expectations that the Federal Reserve will lower interest rates before the end of the year. Gold increased by 1%, while silver also saw gains. Oil traded near a two-month high as Hurricane Beryl indicated a potentially severe storm season, as well as shrinking US crude stockpiles suggesting improved demand.
Turning to the week ahead, the key data point for markets will probably be the US Consumer Price Index report, which is scheduled for release tomorrow. The outcome may influence whether the Federal Reserve acts on interest rates over the summer months, so will be keenly watched by investors.
