I. Performance of Global Equity Indices (in US dollars)
Data source: Bloomberg, compiled by Tiger Brokers
II. Key Market Themes
i. US stocks have entered the Q2 earnings season, with Wall Street expectations on the rise. Will the market continue to buy in?
As of last Friday, about 14% of the S&P 500 constituents have released their latest earnings reports, with 80% of companies beating earnings expectations, higher than the historical average. However, the magnitude of beating expectations is far lower than the historical average. Among them, the financial sector has the largest margin of beating expectations, while the energy sector is relatively weaker. The year-over-year growth in overall earnings of US stocks has increased compared to the end of June.
Overall, Wall Street's earnings expectations for Q2 of US stocks are generally high, especially for technology companies related to AI. In addition to the growth data that has been realized, the profit guidance from management for the future is also a key factor. Compared with the performance of individual stocks the day after the Q1 earnings report, this time there is also the interference of political factors such as the election. We believe that the difficulty of betting on an increase in earnings reports this time will become greater. This week, the earnings reports of Google $谷歌(GOOG)$ and Tesla $特斯拉(TSLA)$ may determine the short-term direction of the Nasdaq.
Data source: Factset, Morgan Stanley Research, compiled by Tiger Brokers
ii. US stocks are in turmoil, with tech giants falling together, how long will the "Trump trade" continue?
In the past week, the US stock market has been extremely volatile, with small-cap stocks rising first and then falling, and big tech stocks continuing to decline. Among them, AI technology stocks such as TSMC $台积电(TSM)$ and Micron $美光科技(MU)$ have seen a weekly decline of more than 10%. We issued a warning last week, "If the subsequent earnings reports cannot meet market expectations, big tech may lag behind the market." In fact, the situation this week is more tragic than we expected. Although TSMC handed in a very good report card, it was still hit hard by the market.
Looking comprehensively, the current market is affected by the dual influences of the "interest rate cut trade" and the "Trump trade," which is relatively chaotic. On the one hand, economic employment has replaced inflation as the focus of the Federal Reserve's observation. Every time there is an unexpected economic downturn, it may trigger market concerns about the Federal Reserve's lagging interest rate cuts; although Federal Reserve officials have recently come out frequently to dove, but from historical experience, after the yield curve goes from inversion to normal, the US economy has invariably entered a recession.
Data source: Bloomberg, compiled by Tiger Brokers
On the other hand, Trump, as an uncertain factor, is gradually fermenting. He publicly shouted at the Federal Reserve, "Interest rates should not be cut before November," and threatened Taiwan "Should pay more to the US," which directly triggered a week of market turmoil. We believe that Trump, in the case of self-recognized victory, has every reason to frequently make a sound and disturb the market in the next three months. "AI + interest rate cuts + Trump" has become the three major factors affecting the market trend in the second half of the year.
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