Economic tension between China and the U.S. is probably the new normal as global equity markets were in the red for the week. The technology sector was under pressure as the White House moved to blacklist Chinese telecommunications giant Huawei from conducting business in the United States. Headlines concerning the U.S. / China dispute will continue to drive the market over the coming weeks in the absence of corporate earnings reports (most companies have reported).
On a more positive note, the minutes of the latest Federal Open Market Committee (FOMC) rate-setting meeting indicate that officials are comfortable leaving interest rates alone and could maintain that approach for “some time.”
Weekly returns to 24 May 2019
(AUD 5-day return far right- hand column)
Notable company news
Tesla (NASDAQ: TSLA)
Tesla’s stock has been weak lately due to concerns over future financing commitments and overall company strategy, but the following chart should give investors some respite. Tesla has a commanding lead over the competition at home and abroad. None of the latest electric vehicles (EVs) from the competition are equivalent to Tesla’s Model S / Model 3 lineup in terms of performance or range.
Tesla is held in Macrovue’s Car of the Future share portfolio.
Corporate earnings update
A large number of U.S-listed companies reported quarterly earnings last week. A summary for companies we've included in our thematic share portfolios (Vues) can be found here.
- 10-Year Treasury yield: -7 basis points to 2.32%
- Gold: +0.7% to US$1284.93
- WTI crude oil: -6.3% to US$58.63
- AUD/USD: +0.95% to 69.34
The week ahead
Although we have a we have a holiday-shortened week in the U.S., news flow relating to the trade war between the U.S. and China will dominate. Reports out this week will give more colour on consumer spending (Consumer Confidence, Personal Spending) and the Federal Reserve’s preferred inflation gauge in April (Core Personal Consumption Expenditure Index), along with trade and pending home sales. The update of gross domestic product data (GDP second estimate) will also provide a look at economy-wide corporate profits.
Charts of the week
1. China is an important destination for tech companies’ products but it’s not THAT important!
2. S&P earnings forward estimates advancing nicely, trade war or no trade war
3. Good news and Bad News. If the first four months are positive for the S&P 500, the full year return is positive (except for 1971). However, the average pullback/drawdown is -8.1% and there is always a drawdown!
4. EV models on the way...