Market Musings 200124: S&P Breakout To New All-Time High

20th Jan by Edmund Shing

5 comments 1494 reads

Market Musings 200124:

S&P breakout to new All-Time High

Key Points:

Technology sector leads, drives US to new highs
Rest of US stock market not really following, yet
Japanese Nikkei index also pushes new 34-year highs
Continental Europe settles, above old highs
Laggards; UK, Emerging Markets (China)
Share buybacks continue to be a strong support for stocks in US, Europe, Japan
Macro liquidity still positive
Bonds: US bond yields edge back up, towards 4.2% on 10-year Treasury
Gold hovers within sight of $2070/oz all-time high
US Natural Gas: Focus on long-term bull case

Technology stocks, AI still in the driving seat

With the US technology sector still in the momentum driving seat in January, as for most of last year, the S&P 500 benchmark index has risen yet further, above the key end-2021 peak level and to a fresh all-time high.

Stocks in the rest of the world are not yet following with the exception of Japan. The Nikkei 225 index has also edged higher this year, remaining around a 34-year high but still some way below its 1989 all-time high around 39,000.

Eurozone stocks continue to consolidate above the ultimate-year high established in December, but have not so far followed the US or Japan to fresh highs. Nevertheless, Eurozone stocks remain well-oriented above old highs, and should move higher if the banks sector can follow through on positive trends. This will likely be triggered by any modest recovery in Eurozone economic sentiment, which remains relatively depressed for the moment.

The UK and Emerging Markets (principally China) remain laggards in this global stock market rally.

Drivers for stocks: Liquidity, buybacks, lower volatility

According to Crossborder Capital, macro liquidity continues to improve, led by the US Federal Reserve and the Peoples Bank of China.

Given the need for the Federal Reserve to support smooth functioning in the US bond market and also to continue to support US Regional banks, I would expect that the Fed continues to push more liquidity into the US financial system. The PBOC in China will need to do similar, given the difficult economic situation surrounding the property market, consumer…

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ACounsell

20th Jan

Hi Edmund

I really must have the wrong selections for my Japanese exposure! Baillie Gifford Japan Trust (LON:BGFD) is down 20% over the last 2 years and Baillie Gifford Japanese Smaller Companies B Acc Fund is even worse!! I know that part of the issue is the foreign currency effect but this Investment Trust and Fund from the Baillie Gifford stable have woefully underperformed the Japanese market. I also have gold exposure (physical ETF) and gold miners ETFs (large & small) and bond exposure (UK gilts, Corporate Bond Funds and ETFs) and yet my portfolio value continues to sink. Maybe your analysis will be accurate and the year will see a turnaround. I won't hold my breath!

Rusty2

21st Jan

I also hold Baillie Gifford Japan Trust (LON:BGFD) I'm down 31%, very disappointing. However on gold I bought early 2020 and those are up over 40%.

US technology stocks are up Friday, mainly due to chipmaker Super Micro Computer (NSQ:SMCI), who were up 35.9%.

The problem with AI software is its needs a lot more memory to run, I have some on my photo editing. I've had to buy a new computer with a uprated graphics card, many others will be doing the same. NVIDIA (NSQ:NVDA) will be doing well for some time.

BnB

The problem with AI software is its needs a lot more memory to run

This. I bought Micron Technology (NSQ:MU) a while back for this reason. A number of analysts have the name as their top semi pick for 2024 - though that doesn’t always work out well. It’s a horribly cyclical company, but the stocks of almost all semi cos give a wild ride!

littledavesab

22nd Jan

Hi AC

I think much of the performance in Japanese smaller caps has been more the value end of the market which is more targeted by the activist funds AVI Global Trust AJOT / Nippon Active Value Fund (NAVF). This prompted me to have a look at the performance of these (Trustnet data) and its interesting that NAVF is by far leading the pack. BG generally have a more growth mentality.

Of course the currency movements do not help either

Nippon Active Value Fund PLC ORD X 3YR = 56.70% / 1 YR = 24.50%
AVI Japan Opportunity Trust Plc ORD 1P X 3 YR = 12.40% / 1 YR = 5.90%
The Baillie Gifford Japan Trust PLC Ord X3 YR = -32.20% / 1 YR = -7.60%
JPMorgan Japan Small Cap Growth & Income Plc X3 YR = -37.20% / 1 YR = -1.30%

NAVF was featured on the Moneymasters podcast around 22/4/23

https://www.trustnet.com/news/...

Market Musings 200124: S&P breakout to new All-Time High