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Over the past week, the S&P 500 lost 1.9% in value, despite a 6.4% week-on-week rise in the previous week. As last Monday’s article predicted, this rise was predominantly limited to a single day’s rally (on Friday) and was likely due to deeply oversold positions. There were likely some opportunistic bets made that overall sentiment would continue to be bullish. This didn’t pan out and there is some expectation that the market will remain bearish in the current week, with some rallying on Friday.
Overall, in the first half of this year, the S&P 500’s performance was the worst since 1970 – which it barely squeaked past. Since 1957, in the years when the S&P 500 had a negative first half, the benchmark had a negative second half about 50% of the time.
Websim is the retail division of Intermonte, the primary intermediary of the Italian stock exchange for institutional investors. Leverage Shares often features in its speculative analysis based on macros/fundamentals. However, the information is published in Italian. To provide better information for our non-Italian investors, we bring to you a quick translation of the analysis they present to Italian retail investors. To ensure rapid delivery, text in the charts will not be translated. The views expressed here are of Websim. Leverage Shares in no way endorses these views. If you are unsure about the suitability of an investment, please seek financial advice. View the original at
What might tilt this trend to be more likely for the rest of the year would be the outlook on the broader U.S. economy. Expectations of U.S. first-quarter GDP growth rate facing a 1.5% contraction were unmet; the actual number worked out to be 1.6%. The Atlanta Fed’s GDPNow gauge estimates the second-quarter running at negative 2.1%. In technical terms, this confirms that the U.S. is already in a recession.
Real estate was one strong haven for investors in this year as concerns over inflation grew stronger. In the U.S., the ratio between the average new home price and disposable income were at all-time highs last week.
Over here in Europe, Eurozone inflation rates surged to 8.6% in June, which is up from 8.1% in May, which surpassed expectations of 8.5%. This indicates an increasing squeeze on households across the Eurozone, with France, Italy and Spain reporting new all-time high highs this past week. Unsurprisingly, this is strengthening calls for an aggressive rate hike by the European Central Bank.
The yield on 10-year US Treasury bonds rose 0.08 percentage points to 2.92% while the yield of the 2-year bonds – considered more sensitive – climbed 0.12 percentage points to 2.66%. This is in expectation that central banks would attempt to combat inflation more aggressively. As yields increase, prices fall. Given that the U.S. and Eurozone have a heavy presence in government bond markets worldwide, the total government bond market is projected to have the worst returns over the past 150 years.
In the U.S. equity market, „tech“ – a long-standing mainstay of investor preferences over the past couple of decades – has seen the worst performance over the past six months. Only healthcare and energy stocks show a net outperformance.
In the middle of last month, coverage of the GPU-centric NVIDIA and the CPU-centric AMD had mentioned how a fadeout in overall growth outlook make these overvalued stocks particularly vulnerable. In the first half of the year, both had lost nearly half their value. In the past week alone, NVIDIA plummeted by 13.9% while AMD was down by 14.5%
Over in the oil market, the overall trend seen through most of the past month (which was also covered) continued in the past week: US Oil slid by 1.5% – a rate commensurate with the decline in the S&P 500. This also confirms the broad outlook on energy consumption: with inflation rising, many households in the Western Hemisphere will be reducing their energy consumption somehow. Given the fall in energy prices and the market – along with the increasing expectation of rate hikes – there is very strong argument that the recessionary phase of the inflation/recession cycle has already, in fact, begun.
In Conclusion
For European investors, many brokers offer a host of leveraged inverse products underpinning most high-conviction U.S. stocks, broad indices and commodities that are currently manifesting a very strong use case with the potential realize short-term gains over the course of a week or even longer. With adversity comes opportunity and this is certainly true for the pragmatic and disciplined investor.
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This is a marketing communication. Please refer to the Prospectus of the ETPs and to the KIID before making any final investment decisions.
This information originates from Investium Limited, which has been appointed as distributor of Leverage Shares products in Europe by Leverage Shares Management Company Limited (the “Arranger”). Investium Limited with registered address at 6 Nikou Georgiou Street, Office 302, 1095 Nicosia Cyprus, is a financial services provider regulated by the Cyprus Securities and Exchange Commission (CySEC).
The information is intended only to provide general and preliminary information to investors and shall not be construed as investment, legal or tax advice. Investium Limited and the Arranger (together referred as “Leverage Shares”) assume no liability with regards to any investment, divestment or retention decision taken by the investor on the basis of this information. The views and opinions expressed are those of the author(s) but not necessarily those of Leverage Shares. Opinions are current as of the publication date and are subject to change with market conditions. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results. Information provided by third party sources is believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed.
All performance information is based on historical data and does not predict future returns. Investing is subject to risk, including the possible loss of principal. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of Leverage Shares.
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