Making sense of this crazy world
The World Cup is upon us. As much as the media hypes it up, I just can’t get excited about the tournament. Perhaps it is a hangover from how Everton finished the season and whilst there is some truth in this, the joy of football somehow seems secondary to the money-centric approach of FIFA. Oh well, I may get into it as the tournament progresses.
Excitement is undoubtedly building around SpaceX, which is making its debut today via an Initial Public Offering (IPO). Like the World Cup, the hype machines have been in overdrive!
Why the excitement? What’s the reality?
I thought it important to give some context to the proceedings and provide a perspective on the nature of this investment. Before you know it, you’ll probably find your self-invested, even if it is indirectly.
Last Friday, we saw the Nasdaq fall by 4%, which resonated across markets. Many shares in the technology ecosphere fell significantly. Yet, on Monday, stocks began to rebound as tensions in the Middle East eased and the selloff in AI stocks abated. On Wednesday, however, US tech stocks were again hit with a fresh dose of pessimism as worries resurfaced about the extreme valuations amongst AI stocks. Then, guess what? The Nasdaq rose by 2.54%. We expected volatility, and it’s now playing out.
Whilst there are continued fears over inflation, it’s interesting to note the direction of travel for the oil price, placing aside short-term movements. The oil price has been falling. We’ll explore why this is.
The Iranian conflict doesn’t seem close to being resolved, despite the claims from the Trump administration. On his Truth Social account, the President said “Iran will pay the price.” However, he has delayed planned strikes, and once again, the markets are trying to interpret whether the US is close to a deal or not. Markets have responded well to the news.
Despite the tensions in the Middle East, it is expected in some quarters that the hostilities will be temporary and economic growth will once again be strong.
A warning though by the International Monetary Fund (IMF); their Managing Director said “after facing crisis upon crisis in recent years, the world needs to build foundations that can withstand shocks that have become more frequent.”
This week’s content:
- Markets on high alert
- Concentration risk
- The price of oil is falling
- Why the Middle East will rise again
- SpaceX… exciting or overpriced hype?
- Gold loses its shine
- Conclusion
Markets on high alert
According to the FT, the Vix index, often called Wall Street’s ‘fear gauge’, climbed 2.4 points on Wednesday above its long-term average of 20, to 22.20. Investors have also been cranking up bets against US stocks, with bearish positions on S&P 500 futures rising last week to the highest level since September, according to data from the Commodity Futures Trading Commission.
LGT Wealth have made comment about how recent market moves serve as a reminder that even the strongest investment themes can experience periods of volatility. Last Friday, the Nasdaq suffered its largest one-day decline in over a year, as stronger-than-expected US economic data raised the possibility of an interest rate hike. The sell-off was particularly pronounced across AI-related companies and semiconductor stocks, with weakness spreading into Asian and European markets at the start of this week. South Korea’s technology-heavy Kospi index fell sharply, while Taiwan’s market, where TSMC represents a significant portion of the index, also came under pressure.
Continues…
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Risk warning
Please Note: This communication should not be read as giving specific advice regarding your personal circumstances. This would only be given following detailed assessment of your individual needs. The value of investments may fall as well as rise; you may get back less than invested. Past performance is not necessarily a guide to future returns.