Market Musings 240224: a momentum market, for now
Podcast - The Fed should be more patient
January US inflation figures were stronger than expected. What are the consequences? Edouard Desbonnets, and Guy Ertz, answer the following questions:
Is disinflation over in the US?
How will central bankers react to the rise in inflation in January.
Is there still time to buy bonds?
In which direction will the EUR/USD move?
Global stock markets hit new highs, again
US mega-cap tech continue to lead global stock markets higher, led by Nvidia following stellar quarterly results, yet again.
Since the beginning of 2022, the Magnificent 7 has seen narrowing leadership, now largely driven just by Nvidia and Meta, with some help from Microsoft.
Eurozone stocks followed, with the Euro STOXX 50 index (SX5E) hitting a new multi-year high, led by Tech and also Financials and industrials.
Japanese stocks joined the party, with the Nikkei 225 index (NI225) finally breaching the 1989 all-time high to set a new record after 34 years.
Emerging Market stocks ex China (EXCS) are also moving decisively higher to new highs.
New breakouts to monitor
While Tech is the clear global momentum leader, other sectors should also be watched for opportunities.
US healthcare (XLV) and biotech: (XBI) are breaking out, led by the anti-obesity revolution from Novo Nordisk and Eli Lilly, but also now wider participation from the wider healthcare sector.
Euro Banks and Insurance: still good value and high dividend payers, now also buying back shares to further increase shareholder returns.
Opportunities in bonds, infrastructure
Outside of stocks, look at short-term high yield corporate bonds
These have a relatively short duration of just over 2 years on average, and offer an income yield of 6.5% in US dollars or 4.7% in euros. While high yield and thus higher risk in the corporate bond universe, the relatively short duration of the 0-5 year segment offsets much of this default risk.
A second asset class offering generous income is US Energy Infrastructure, comprising Master Limited Partnership (MLP) companies that…
