The looming launch of a first futures-based bitcoin ETF in the US and the currency’s resilience against China’s crackdowns have been pushing prices to record highs as of late. What else matters this week? Our Research Weekly explains.
- Investor sentiment bottomed in early October, and a year-end rally is on the cards. The state of the global union may just be better than recent headlines make you think.
- We tweaked our cyclical exposure: we moved technical ratings up to Neutral for materials stocks.
In the past week, client roundtables were back on my agenda. The first group meetings in 18 months were a highlight – for myself at least. Luckily, the clients seemed to enjoy them too. Yet despite all the relief about being able to meet up in person again, sentiment was still quite subdued. Granted, we were in the UK (no irony intended), where stagflation has more impact than elsewhere, and tax hikes are beyond the stage of politicians’ musings. High inflation is a general burden to the British pound, and governmental tax plans are not encouraging for many taxpayers. The recent mix of supply disruptions and queues at fuel stations did not help either.
Yet as many investors elsewhere will realise, the state of the global union may just be better than the recent news flow leads us to believe. We understand that the stagflation spectre is haunting investors, and we do see some headwinds for growth in the West due to supply disruptions and price spikes. China is also seeing some slowdown due to the ailing housing sector and credit jitters. However, looking into next year, we see some compelling cases for growth – or the current lack thereof – to be compensated. Energy prices may roll over seasonally and due to supply responses in the coming weeks. The seasonal pattern for stock markets also suggests improving sentiment. Our technical analysis team highlights that the leading US stock index usually shows a seasonal low by the end of October before turning to a year-end rally.
Conclusion for investors
Thus, we have tweaked our exposure towards cyclicals slightly. We stick to the view that this is not the time for big moves back into the space, but maybe it is time to be less conservative towards cyclical assets overall. Our technical analysis team has upgraded materials stocks to Neutral. The cryptocurrency space underpins the view that global investor sentiment most likely bottomed in early October (see our number of the week).
Number of the week
What is going on in the markets? Julius Baer’s experts share their views.