Global equities take another pounding (as TPP strategies position for the 'next' move)

TPP Recap Of The Week:

Another week of losses for global stock markets as positive data was drowned out by conflict in the Middle East.

It’s hard to counteract sentiment or know when it will change. There is a lot going on in the world at the moment, yet numbers from the US showed that GDP is still strong and the economy is doing well.

This will be ignored in the shorter term as noise from the Middle East will drown out any actual economic data. Conflict doesn’t always have the impact that you might think and this isn’t the first time things have escalated in the area. A year after the Russian invasion, the FTSE hit an all-time high, only to fall back 10% this year since then.

Reasons for this are easier to come up with after the fact, but the market will always do, what the market does, and trying to guess it’s short-term direction is a very difficult game to play.

Economic news this week was highlighted by a better-than-expected gross domestic product report, which showed that the U.S. economy grew at an annualized pace of 4.9% in the third quarter, led by strong consumer spending. It was the best showing since the end of 2021 and more than double the level seen in the second quarter. Other data also appeared benign, as home sales reached a 19-month high and S&P Global’s flash U.S.

Composite Purchasing Managers’ Index (PMI) ticked up from September.

Meanwhile, the core personal consumption expenditures price index, the Federal Reserve’s preferred inflation gauge, provided mixed evidence on whether inflation is moderating. On a monthly basis, core PCE—which excludes volatile food and energy costs—increased to 0.3% in September from 0.1% in August

The major U.S. stock benchmarks finished lower for a second straight week, as market sentiment was dented by mixed corporate earnings reports and concerns about higher interest rates—highlighted by the yield on the benchmark 10-year U.S. Treasury note briefly breaching the 5% level for the first time in 16 years.

It was a busy week for quarterly earnings reports, with nearly a third of the S&P 500 Index due to report. Investors seemed particularly focused on results from Amazon, Google parent Alphabet, Facebook owner Meta Platforms, and Microsoft, all of which are members of the mega-cap technology-focused group of stocks known as the Magnificent Seven that helped drive positive market results earlier in the year.

Although most metrics reported by the companies showed solid growth and exceeded consensus expectations, markets seemed to pounce on indications of rising expenses, which weighed on shares. Amazon’s report, released after the market closed on Thursday, appeared to receive the most positive reaction, and shares of the company rallied on Friday.

The FTSE 100 closed 0.9% lower again on Friday, with consumer staples like Unilever and Diageo falling more than 2% each and pulling the index lower. Shares of NatWest slumped 11.6% to the bottom of the FTSE 100, and suffered their biggest one-day drop in seven years since Brexit in 2016, after a profit downgrade and as it faced regulatory scrutiny over potential breaches in its "debanking" of former Brexit party leader Nigel Farage.

The banks index shed 2.3% and ended the week 5.4% lower even though Lloyds, the UK's biggest mortgage lender reported a rise in profits.

Lloyds Banking Group, which owns Halifax and Bank of Scotland, reported pre-tax profits of £5.728bn for the nine months ending in September.

Higher base interest rates set by the Bank of England have yielded £13.7bn in income, a 7% increase from a year earlier.

Focus will now turn to Bank of England's interest rate decision next week, after the European Central Bank stood pat on interest rates on Thursday, as expected.

"We expect the Bank of England to keep rates on hold for a second consecutive month. Inflation is still too high, but we expect more progress over coming months and that should enable some gradual rate cuts from summer next year," economists at ING Economics said in a note. Drugmakers AstraZeneca and GSK fell over 2.5% each after French peer Sanofi's downbeat forecast.

IAG beat forecasts with a strong third-quarter profit, but it flagged economic uncertainties and was unsure how the Middle East turmoil could affect bookings and jet fuel costs into next year. Shares of the British Airways owner eased 0.6%.

The mid-cap FTSE 250 snapped a three-day losing streak to climb 0.5%, but still ended its sixth straight week lower and is now down -11.85% on the year so far.

The pan-European STOXX Europe 600 Index ended the week 0.96% lower amid uncertainty about interest rates, the economy, and conflicts in the Middle East. Major stock indexes slipped. Germany’s DAX fell 0.75%, France’s CAC 40 Index eased 0.31%, and Italy’s FTSE MIB dipped 0.25%. 

Eurozone government bond yields eased slightly after the European Central Bank (ECB) kept short-term interest rates on hold, raising expectations that rates have finally peaked in the eurozone. The 10-year German bund yield fell to around 2.84%, while the 10-year Italian government bond yield slipped to around 4.81%.

Japan’s stock markets eased over the week, with the Nikkei 225 Index down 0.86% and the broader TOPIX Index little changed. Rising bond yields and geopolitical tensions weighed on market sentiment at the start of the week, but investor bottom-fishing at the lows, a rebound in technology stocks, and a fresh dose of Chinese economic stimulus helped local stock markets recoup their losses.

Tokyo’s core inflation rate, a leading indicator of nationwide price trends, accelerated to 2.7% in October, which was above consensus and the first strengthening in four months.

The consumer price index for Japan rose to 3.3% from 2.8% in September.

Equities in China rose as an improvement in industrial profits suggested that the economy may be stabilizing. The Shanghai Composite Index advanced 1.16% while the blue chip CSI 300 gained 1.48%. In Hong Kong, the benchmark Hang Seng Index added 1.32% in the holiday-shortened week. Stock markets in Hong Kong were closed Monday for the Chung Yeung Festival.

Profits at industrial firms in China increased by 11.9% in September from the prior-year period, marking the second consecutive monthly increase, but slowed from the 17.2% rise in August. 

The Week Ahead:

This week we have interest rate meetings from the US, Japan and the UK. We’ll also see US ISM and PMI’s as well as another nonfarm payroll figure.

With Fed fund futures implying a 99.91% chance of a hold, we’d be inclined to say it is a done deal. Several Fed members were quick to point to the uncertainties that the Middle East conflict could bring to monetary policy, with some saying that the rise of bond yields could even do policy for them (to prevent them from hiking rates further). So if there is anything to clean from the statement or subsequent press conference, it is whether there’s any juice in the tightening tank further down the track.

The FFF curve suggests January as the most probably meeting for a hike, which is just 26%. This may not be the most lively of Fed meetings in a while.

A Reuters poll shows that 83% of economists expect the BOE to hold interest rates at 5.25% and recent data likely backs up that view, with flash PMIs suggesting the economy is continuing to slow, job growth printing a negative figure for a second month. Of course, the obvious fly in the ointment is that inflation remains high. This likely keeps the hawkish tone to their statement, but my assumption is we’ll have another 5-4 vote in favour of a hold.

Nonfarm payrolls remain punchy as ever, with 336k jobs added in September. Unless we see some dire numbers from PMIs or employment, the Fed will be forced to stick to their ‘higher for longer’ narrative. This shouldn’t have a huge impact, as it’s all we’ve been hearing for a while.

Leader Board - Top Trading Strategy

Closing Comments:

Another poor week for global equities and investors. However, something interesting has been happening on the TPP platform over the last few trading days.

We've referenced before that many of our strategies have been beating market performance this year by 'buying the dip' and then 2 weeks ago- many strategies switched to the SELL side and made profits as markets fell.

Well......

This week many of the short sell trades were closed in profit and as the week progressed we've witnessed another interesting evolution on the TPP portfolios. Yet again- they're buying the dip.

Many of the 'short sell' trades have been covered and profits taken. This volatility really is creating opportunities at the moment.

The current situation in this region is horrible to watch, but our traders are tasked with beating markets and managing risks, and if this bias assists with that- our clients will be happy.

We hope that by building products like TPP that investors will see there are investment solutions out there that can perform regardless of the investment climate.

Why merely track a market, when opportunities can be taken advantage of in the short and mid term?

Adding small short SELL positions as the markets fall is one of many ways our strategies make modifications to consistently beat the markets.

If you're frustrated with what many believe is a stale and outdated wealth management model- then consider arranging a call with our team.

We are also of the opinion that the industry needs revamped, and that wealth and asset managers have no excuses for failing to beat their benchmarks most years.

Investors want more than 4, 5, or 6% per annum, without taking on excessive risk.

Investors are frustrated with the poor performance and excessive fees.

Ladies/Gents - this is the very reason why we built TPP.

TPP has been built for frustrated investors globally. It's time to empower yourself, and start to beat your benchmark. At TPP we offer a multitude of different strategies and trading techniques- they all have one thing in common. They are all designed to beat their market benchmark. Their track records suggest they will do exactly that.  It's time for change. No more exposure to underperforming funds, and their inflated fees.

TPP has been built to disrupt the market place and offer investors the solution they've been craving. Welcome to the future of investing.