After a rally at the back end of last week, what now?
March 6, 2023
Good Morning and welcome to another week in the markets.
European stocks have opened slightly higher for a third straight session as investors weigh the outlook for rate hikes amid signs of resilient economic growth and a better-than-feared corporate earnings season.
The Stoxx 600 was up 0.2% by 8:08 a.m. in London, with consumer products and retail sectors rising, while miners slumped with metals after China set a cautious economic growth target of about 5% for the year and didn’t announce any major new stimulus.
Credit Suisse Group AG fell after Harris Associates stock picker David Herro sold the firm’s entire stake in the Swiss bank, ending ties after about two decades of ownership.
Repsol SA was slightly higher after it said it would to buy back as much as 909.8 million euros ($969.1 million) worth of shares. Telecom Italia SpA jumped after Italy’s state lender and Macquarie Group Ltd. made an offer for the telecom’s landline network, setting up a multi-billion-euro takeover battle with KKR & Co.
A rally in European stocks had moderated in February as investors feared central banks would keep rates higher for longer, but signs that the economy is able to weather the impact of elevated inflation have boosted risk sentiment in recent days.
The week is dominated by US employment reports in the shape of the monthly non-farm payroll (NFP) and automatic data processing (ADP) figures, and by rate decisions from the central banks of Australia, Canada and Japan.
Only the first is expected to keep hiking rates, with the middle keeping them at their current high and the latter holding them once more. UK earnings cover a variety of sectors, but Greggs, Admiral and PageGroup might be key ones to monitor.
The main draw this week will be Federal Reserve chair Jay Powell’s twice-yearly monetary policy testimony to the Senate Banking Committee in Washington on Tuesday. A day later, the Fed will publish its Beige Book on economic conditions.
The UK, EU and Japan will all update on gross domestic product, with the latter also making a rate-setting decision on Friday.
Lego has proved remarkably resilient in recent years in the face of changing fashions in children’s play and wider societal trends, such as environmental activism (the company has pledged to eliminate plastic bag use in its sets by 2025) and the rise of computer games. So a key question when the company reports numbers on Tuesday is how long its stellar growth can last.
Another resilient and adaptable brand is Greggs, which also reports on Tuesday. Rising raw material costs have pushed the British high street’s naughty-but-nice bakery to test the elasticity of demand for its products with a series of price increases.
The share price of The Restaurant Group has climbed in the past fortnight after activist investor Oasis accused the Wagamama owner of mismanaging the business. Rumours are swirling about a possible carve-out of TRG’s pub business.
The insurance sector will also feature heavily this week with figures from Admiral, Royal London and Legal & General on Wednesday, a day before Aviva reports its numbers. Issues include the implementation of Solvency II reforms, expected to reap rewards in terms of investment.
And finally, reform of the UK’s gambling industry is a challenge for companies in the sector, such as Entain, which reports results on Thursday.
Our market bias at the moment:
Many of our leveraged trackers and 'buy or flat' strategies posted solid gains at the back end of last week as the markets rallied. Our active strategies also used this opportunity to liquidate many of their 'short term buy hedges' they had in place against their overall SELL bias.
The result of this is that many of the portfolios on The Portfolio Platform now have a SHORT SELL BIAS within their strategies.
Some have taken advantage of a rising market this year, but as of late, we have definitely spotted a change in sentiment on our platform.
Timing a short sell trade is often hard to time particularly when momentum is strong on the buy side, but if (and hopefully when) they call this potential retracement right- it's a huge advantage of having a portfolio on TPP. If the markets drop, what does your wealth manager do? On TPP- we find that on the 4-5 occasions per annum where we have an overall short sell bias- that it's often the difference between a strategy that performs reasonably- and one that performs excellently.
After a solid end to 2022, and a particularly pleasing Q4- our traders and trading teams will be keen to start 2023 on the front foot with a strong Q1.
Whether global markets bounce back this year, or trade in a range- our traders are tasked with achieving a minimum of 2 x their market benchmark per annum.
If you currently have an underperforming portfolio elsewhere, or are holding cash whilst waiting for an entry point- contact our team for a FREE market consultation.
Join the investment revolution.
“TPP might just be about to revolutionise investment for the retail market.”
- London Stock Exchange 2020