Weekly Market Update

Markets Reflect Diverging Economic Paths for U.S. and Europe

November 26, 2024

While data shows resilience and strength in the U.S. economy, Europe appears to be slipping into contraction territory, weighed down by energy challenges, political uncertainty, and the looming threat of U.S. tariffs. The U.S. services PMI rose a robust 2 points, while the manufacturing and services PMIs for Germany and France plunged below 50. This economic divergence led to sharp moves in currency markets, with the Euro falling over 2% against the resurgent U.S. dollar to a two-year low of 1.03.

Bond Markets Signal Contrasting Policy Expectations

Bond markets are now pricing very different monetary policy paths on either side of the Atlantic. Odds of a 50bp rate cut by the European Central Bank in December have risen to 50% amid Europe’s dismal data. Meanwhile, expectations for further Fed easing have dropped, with just a 50% chance of a December cut. Upcoming U.S. CPI data will be pivotal—a reading above 0.3% could eliminate the possibility of any cut.

Europe's Economic Struggles: Energy, Politics, and Tariffs

Europe's challenges appear largely internal. Political instability in France and Germany is weighing on sentiment, while the UK economy is losing momentum with deeply negative retail sales and PMI data. Adding to the strain, U.S. tariffs could pose a major threat to Europe’s fragile economy. While such pressures might push the Eurozone toward fiscal integration and joint bond issuance, political divisions remain a significant obstacle.

U.S. Resilience Amid Inflation Concerns
In contrast, U.S. policymakers remain cautiously optimistic. Inflation appears to be steadily declining, but persistent stickiness in prices and wages could slow the Fed’s easing path. Political polarisation continues to colour sentiment, but the U.S. economy retains its position of strength relative to Europe.

A New Policy Direction Under Bessent
Investors are welcoming Bessent as a "safe pair of hands" given his finance industry background and perceived orthodoxy compared to other Trump cabinet picks. In a Wall Street Journal interview, Bessent struck a measured tone on tariffs, framing them as a negotiating tool to be deployed gradually rather than an immediate bludgeon. This assuaged some market fears of a destabilising trade war.

Bessent is also backing business-friendly policies like middle-class tax cuts and incentives to boost domestic oil production by 3 million barrels per day. Small-cap stocks, as measured by the Russell 2000, outperformed with a 1.5% gain on the day, potentially reflecting optimism about Bessent's plan to eliminate taxes on tips for restaurant workers and other small businesses. However, Bessent did raise some eyebrows by entertaining the notion of a central bank "shadow chair," which could threaten Fed independence.

Key Risks Ahead: Monitoring CPI and Global Trade Dynamics

U.S. exceptionalism looks set to continue, with recession risks far higher in Europe. However, key events in the coming weeks—U.S. inflation data and Black Friday spending—will provide critical insights into the health of America’s economy and its resilience in the face of global uncertainties.

July 2022 Global Macro Update

August 2, 2024
Read More

Valuation vs foresight - part 2

August 2, 2024
Read More

US CPI beats economists' expectations

August 2, 2024
The most anticipated economic release of the week (and of the month) turned out to be simultaneously shocking and monotonous. The US Consumer Price Index for June came out at 9.1% Year-on-Year increase, much higher than the 8.8% growth predicted by economists.
Read More

Rebound in the Nasdaq

August 2, 2024
Markets were up more or less in unison last week despite, or really because of, largely weak economic data in the US and mixed results from the US earnings season.
Read More

Markets finish off the month with a strong week

August 2, 2024
Markets capped off a strong month with an even stronger week, with the leading US market up 4% for the week and 9% of for the month.
Read More

Japan - marching to a different tune

August 2, 2024
Join Jonathan Ramsay and Andrew Hunt as they discuss how Japan diverts from the norm when it comes to economics.
Read More

What happened in markets in 2021, and why?

August 2, 2024
Join InvestSense Director, Jonathon Ramsey to reflect on the price action seen in markets in 2021 and what this might mean for 2022.
Read More

We've got a bad case of FOMO, but it's not what you think

August 2, 2024
With valuation still being the lightening rod for when markets react to external forces, the most expensive things tend to move the most. What does this mean for global asset allocators, and what is InvestSense’s position?
Read More

Markets ended up on the back foot after an unexpected U-turn by Fed Chair Jerome Powell on inflation. Or was it so unexpected?

August 2, 2024
Markets ended up on the back foot after an unexpected U-turn by Fed Chair Jerome Powell on inflation. The large local miners and banks fared much better but Australian market was dragged down by quite big reactions to news from a handful of stocks.
Read More

The Santa Rally, Finally

August 2, 2024
After a volatile start to the month the traditional Santa Rally kicked in during the penultimate week of the year in the lead up to Christmas Day (and has continued overseas in the overseas markets that have been trading since then).
Read More

2021 In Review

August 2, 2024
It turned out to be another banner year for markets, the third straight one in a row, taking most markets, and especially US markets, to all time highs.
Read More

Tech stocks on the back foot, interest rate expectations rise

August 2, 2024
It turned out to be another banner year for markets, the third straight one in a row, taking most markets, and especially US markets, to all time highs.
Read More

Markets slid again last week, with a concentrated sell off in US tech

August 2, 2024
Markets slid again last week but the selling was concentrated in US tech, most of which is down 10% or so this year. Much of last week’s selling occurred in the last 2 sessions of the week.
Read More

Recession fears build, yet equity markets end the week higher

August 2, 2024
Fears of a US recession later this year gathered pace last week and the US equity market jumped by almost 7% and the Nasdaq was up some 9%.
Read More

Inflation - Flash Update

August 2, 2024
In light of the recent inflation data coming out of the US, we dive in to why the market is so upset about a 0.1% increase in prices, and what this means from an Australian investor's perspective.
Read More

Interest rate sensitivity persists into the new year

August 2, 2024
During the last few weeks, the prospect of rising interest rate expectations continued to grip markets, as the soft landing/rapid disinflation thesis was tested.
Read More

Strong start to the year continues despite recession concerns

August 2, 2024
As the world’s elite gathered in a snowless Davos, markets focused on much more immediate concerns, starting with the continuing wave of layoffs in corporate America. Amazon, Microsoft, Alphabet (Google’s parent company), Salesforce and Goldman Sachs, among others, took turns to announce staff cuts. It would appear boardrooms and CEOs are lending some credence to the possibility of a recession in 2023.
Read More

Equities turbulent but resilient as interest rates rise

August 2, 2024
Last week the S&P 500 traded in a 3% range, having done a 2% round trip on Thursday, followed by a 3% fall on Friday after the inflation data release and then another almost 2% round trip yesterday. Emerging markets were the worst performing, down 4% for the week. Taking a step back though, most equity markets haven’t given back that much of their gains from January, while Europe and the Nasdaq remain up 10% for the year.
Read More

Helping your clients assess the climate impact of their Portfolio

August 2, 2024
Nathan Fradley explains how the ethosesg technology can help you assess and design an ethical portfolio that aligns to an investor’s personal values.
Read More

Carbon credits and investing – is it the outcome we expect?

August 2, 2024
ETFs that invest in carbon credits are now available. Why should we assume that their price will go up over time? And does buying a carbon credit ETF actually contribute positively to emissions reduction? Will it actually generate the outcome investors are expecting? This article explores the issues around investing in carbon credits.
Read More

Better World makes a difference with investment in renewables

August 2, 2024
There are many direct assets and funds that contribute positively to climate action within the InvestSense Better World Portfolios. Meridian Energy is one of the stand-out direct assets in the portfolio with a climate energy focus.
Read More

Bad news equals good news

August 2, 2024
In recent years professional investors have got increasingly used to the fact that good news is bad news for markets because higher interest rates are likely to be necessary, and of course vice-versa. However, last week the effect was stronger than ever and stocks rallied mid-week amidst reports of widespread lay-offs and expectations of a weak US jobs report.
Read More

‘Buy the dip’ opportunism start surfacing

August 2, 2024
The US market finally market caught a bid last week. Early in the week the market was down few percent after an earnings miss by ad dependent social media platform Snap (of Snapchat fame) combined with weak guidance raised more doubts about the economy and economic resilience of tech companies.
Read More

US momentarily dips into official bear market territory

August 2, 2024
The seventh negative week in a row for the US sent it briefly into official bear market territory before it recovered slightly late on Friday. The world’s largest stocks (Apple, Microsoft Amazon and Google) are all down 25%.
Read More

How Mark Lewin saved 13 hours a week with Managed Accounts

August 2, 2024
Mark Lewin was a financial planner, but is now the Director of Back Office Heros. In his planning business he gained significant efficiencies by recommending and implementing managed accounts for his clients. He tells us how...
Read More
Icon of a letter

InvestSense insights, delivered straight to your inbox.

Icon of a letter

Get the latest industry news

Icon of a letter

Get the latest industry news

Icon of a letter

Get the latest industry news