What Happened Last Week?
Yet again markets have surprised to the upside this week. No complaints here, but with a backdrop of growing geo political tensions and increasing financial pressures on consumers the world over, the speed and magnitude of these rises have outpaced even the more bullish market pundits, and the question now is how sustainable they are for the remainder of 2023.
Last weeks AI infused boost has led to a more sustained rally across the technology sector. Big tech and in particular EV related stocks have seen returns to favour amongst investors, alongside the travel sector, where concerns over debt levels and capacity are being overshadowed by strong bookings and reducing fuel costs.
Asian stocks have seen a strong week led by China, and some excitement over whether Japanese stocks could finally be emerging from their slumber after sluggish economic activity for over a decade. Valuations in these two markets certainly look attractive. In China much will depend on whether the PBOC returns to a more aggressive policy of supporting growth, which has most certainly faltered to reduced expectations of perhaps sub 5%. A growth rate western counterparts can only dream of, but for a market built on such high expectations, supportive policy could see these gains consolidated and further improved in a very short timescale.
Selected Government Bonds look more attractive and we are preferring US treasuries with an eye on the Feds next interest rate decision. Inflation is showing tentative signs of relaxing in the worlds largest economy and now could be a great time to take advantage of stronger yields and solid potential for capital appreciation.
We favoured Technology, Asian and Emerging stocks for 2023 after the initial flurry in January across global markets. Much will depend upon central bank policies and politics as to where we go from here with expectations of strengthening earnings waning, but for now global markets have found some space to hide from these concerns.
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