In our Finance Talk, Patrik Lang, Head Equity Research, comments on the latest market developments. Key takeaways:
Optimism: “We share the positive view of the equity markets after the meeting between Trump and Juncker, since both sides agreed to reduce tariffs. Even though it is just an informal agreement, this could be the start of a long negotiation process. The risk of a full-blown trade war between Europe and the US has decreased.”
Earnings season: “Earnings growth is tracking 24 per cent for the S&P 500 companies, driven by cyclical sectors, including IT. This confirms our bullish view on cyclical stocks.”
Car sector: “On the same day of the agreement of a cease-fire, all three US car manufacturers published very weak results, including profit warnings. In their statements, they referred explicitly to the tariff changes as one of the causes, especially the increased costs for aluminium and steel. Now, as fears of a trade war may ease, there might be a rally over the next few weeks. We think that this is a good sales opportunity, as we stick to our negative view on the sector.”
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