Global stock markets had another good week, thanks to a strong late surge from the US market. This all came through on Thursday and Friday (thanks largely to a 20% gain for Meta in Friday’s trade). This meant that February got off to a flyer, although January was pretty flat for markets. The Magnus portfolios were also flat across the board in January (not too bad a result given the UK bond markets were down about 2%), but have started well in February, with one of our US managers having an overweight position in Meta. This week doesn’t have the fireworks of last week, but there are some key earnings’ reports for some of the big UK companies – coming out on Thursday morning along with the Chinese inflation number which is the key economic data point for the week.
Last week
- Global stock markets had a very good week, with all the gains coming in the last 2 days
- UK stock markets were fairly flat
- Meta rose over 20% on Friday alone (which will benefit the Magnus portfolios as one of our US funds has an overweight position to this stock)
- Bond markets were choppy but rose on the week
- Central banks kept interest rates on hold and signaled that interest rate cuts might not come as quicky as the bond markets had been pricing (due largely to the strength of the US economy which posted some super strong jobs numbers on Friday)
This week
- It’s another busy week for corporate earnings, but without the blockbuster names that we had last week
- Some of the key UK FTSE 100 stocks report this week, with BP reporting tomorrow and then Astrazeneca, Unilever and British American Tobacco all report their full year numbers on Thursday.
- In the US, we have Mcdonald’s reporting today, UBS tomorrow, Walt Disney on Wednesday and then PepsiCo on Friday – so will get another good look at the strength of the US consumer
- It’s a pretty quiet week in terms of economic data, with Chinese inflation numbers on Wednesday night being the highlight. Inflation in China has been negative recently (i.e. deflation, so anything less bad than feared would be taken as a result!)
Equity returns are in GBP, Oil is in USD. Gold is shown in GBP. Bond returns are all shown in GBP. Source Bloomberg.
More detail
- Global stock markets had a very strong week, powered by the US market which rose by over 2%. This rise all came in the last 2 days of the week (i.e. the first 2 days of February) and was driven by big technology / consumer stocks. Specifically, Meta rose by 21% on Friday alone and Amazon was up by over 10% on Thursday and Friday. Meta surprised to the upside in reporting its earnings (profit) and revenue (sales) numbers, with revenue showing a 25% increase over the course of the last year. Meta also announced that from March, they will be paying their first dividend ever.
- Meta is held by several funds within the Magnus portfolios, with the Columbia Threadneedle US disciplined core fund holding it at an overweight position. This fund is held across all of the model portfolios and is up over 3.5% already this year to Thursday’s close (i.e. before the Meta numbers kick in).
- Although February has got off to a flyer with the US equity markets boosting returns, January was a fairly flat month. Global stock markets finished January up by about 1.2%, with UK stock markets down by about 1.3%. Bond markets on the other hand finished January down by about 2.2%. This made for flat returns across the board for the Magnus portfolios for the month.
- Last week was a really key one to get through for the US corporate earnings season as it saw roughly 24% of the US index (by market capitalization weighting) reporting their numbers. We are now 46% of the way through the reporting season and the numbers have been pretty good. The blended growth rate in yearly earnings is 1.6% (which is a touch better than the 1.5% that analysts had penciled in).
- Bond markets (as per the UK Gilt market) rose by 0.5% last week, with US Treasury bonds rising by 0.7%. These markets remain very choppy (hence our preference in the Magnus portfolios for short-dated bonds) and one of the key reasons for this is the uncertainty around the future path of interest rates. Currently, the Central Bankers are saying one thing (gradual interest rate cuts) and the bond markets have been pricing another (aggressive interest rate cuts). Our view is that reality likely lies somewhere in the middle!
- Central Bank meetings in the US and the UK drove bond markets last week along with some key US jobs data. The US Federal Reserve held interest rates at 5.5% and the Bank of England held interest rates at 5.25%. Importantly, Fed Chair Powell stated that he didn’t expect to be making a cut to interest rates in March (which the bond markets had been pricing). The Fed have indicated that they’ll be making 3 interest rate cuts this year whilst the bond markets had previously been pricing in a whopping 7 interest rate cuts: this has now been re-priced to 5 interest rate cuts: hence our view about meeting in the middle! Another key driver here continues to be the strength of the US economy. Friday’s monthly jobs numbers showed nearly twice as many jobs were created in January in the US than had been expected! Moreover, unemployment ticked down (to 3.7%) and wages went up (now growing at 4.5%): not exactly signs of a slowing economy!
- In the UK, Governor Bailey’s language signaled a shift towards cutting interest rates. He noted that they “won’t leave the Bank rate on hold any longer than we need to” and it’s worth noting that 1 of the 9 Committee members voted for an interest rate cut at this meeting (2 voted for a hike and the other 6 voted for a hold). Bond markets are pricing in the first interest rate cut in June of this year.
The value of investments and the income from them can go down as well as up and you could get back less than you invested. Past performance is not a reliable indicator of future performance.
The content of this article should not be relied upon when making investment decisions, and at no point should the information be treated as specific advice. The article has no regard for the specific investment objectives, financial situation or needs of any specific client, person, or entity.
