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Morning Brew March 1 2024
Erik Schafhauser
Senior Relationship Manager
Summary: Are we topping out?
Good Morning,
Stocks rose yesterday, fueled by the fact that the PCE Price index did not surprise to the upside as some apparently hat feared. Both the Nasdaq 100, climbing 1% to 18,044, and the S&P 500, adding 0.5% to 5,096, making new record highs.Volumes were huge at 20% above the regular volume (20 d MA). AMD soared 9.1% while Marvell Technologies, ARM, Intel, and Nvidia gained 6.1%, 5.4%, 2.5% and 1.9% respectively, Dell added 17% after results after the bell.
Levels to digest: The US500 is above 5100, The Dow 39k, the Japan 225 is testing 40k, the US tech 100 NAS the 18100, GER40 17800. Our Peter Garnry is going out on a limb and calls a top or at least the promximity thereof.
Here we go again, the bubble fever is back! :
“Last year we said that equity valuations were not a concern for global equities but US equities were getting increasingly stretched. However, when you have an AI hype then things can get really stretched and our view is now that we have entered a dangerous level again in US equities. As our valuation chart below shows, US equities are now significantly more expensive compared to the average valuation since 1992. In fact, US equities have now reached levels we have only observed during the dot-com bubble and the 2021 technology bubble during the pandemic.”What should investors do:
- Reduce exposure to equities and increase exposure to bonds in order to reduce portfolio risk.
- Reduce exposure to US equities and Increase exposure to European equities which have a less cyclical profile and lower equity valuation.
- Increase exposure to dividend stocks as they will likely be less volatile should the equity market begin to reduce lower US equity valuations.
Rates came off a little while the USD Index gained after the inflation data, the USD Index is 104.15 at the moment with EURUSD 1.0810, GBPUSD 1.2626 and USDJPY back above 150. Gold and Silver gained to 2046 and 22.73, both are at technically very interesting levels and if Gold manages to close above the descending trendline many would see that as a strong sign.
Bitcoin it taking a breather below the all time highs, tha twill be intersting!
If you want to learn more about why the commitment of Traders report is important, check out this podcast with Ole
China's parliament is expected to unveil more stimulus next week, while Deutsche Bank is said to be preparing a liquidation lawsuit in Hong Kong against Chinese developer Shimao Group, acc to Reuters.
Today we will focus on the sentiment into the month start, weekly close levels, EU Inflation, the US PMI and the University of Michigan sentiment.
Trade safely