Tug of War...

In the stock market tug of war, the bulls are back in the game.

A solid start to the earnings season and positive economic data raised investor confidence last week. They continued to buy the dip on the evidence of peaking supply chain bottlenecks and the easing of the delta variant spread. 

The markets started the week in the red as the oil prices continued to rise, but the bulls charged back on Thursday as the earnings season officially started.

The S&P 500, DOW, and the Nasdaq recovered from the lows of September and are now only marginally short of their all-time highs. 

As expected, the FOMC meeting minutes released on Wednesday confirmed the beginning of Taper before the year-end.

However, an interest increase is unlikely, at least for a year, so the monetary policy will continue to support the economy and markets. 

Europe

European equities were also up in the hopes of solid economic recovery and strong corporate earnings. The Euro Stoxx Index was up by European STOXX Europe by 2.65%. Individual country indices were as follows;

• France’s CAC 40 Index gained 2.55%.
• Germany’s Xetra DAX Index was up by 2.51%.
• The UK’s FTSE 100 Index advanced 1.95%.
• Italy’s FTSE MIB Index rose 1.68%.

Japan

Japanese stocks’ returns were positive during the week, with The Nikkei 225 Index rising 3.64% and the TOPIX Index gaining 3.16%. 

China 

Halloween started early in China this year as investors remained spooked by real estate debt default and the energy crisis. 

Chinese markets were flat as the CSI 300 Index gained 0.3% and the Shanghai Composite Index dipped 0.6%

India

Investors in India were buoyed up in the Dusshera spirit, global cues, and robust corporate earnings. The Nifty breached the 18000 level to end at 18,338.35 and the Sensex at 61,305.95.

In the latest report, IMF stated that the Indian economy will grow by 9.50% in 2021 and by 8.50% in 2022. While the global growth numbers are expected to be down marginally from 6.00% to 5.9% in 2021 and 4.9% in 2022

Outlook

The Tug of war between the bulls and bears is very likely to continue over the next few months, as the markets face the following positive and negative factors;

Positive

1. Strong earnings supporting valuations
2. The upcoming festive and holiday seasons typically is good during bull runs 
3. Expanding global economy
4. Low-interest rates
5. Record stock buybacks

Negative

1. Supply chain bottlenecks are persisting and could affect retail sales during the holiday season.
2. High inflation is also continuing longer than expected, and it could impact corporate earnings and investment.
3. Valuations are still high for a fragile state of the global economy.
4. An increase in interest rates earlier can trigger a liquidity crisis. 
5. Energy demand and prices are still high, while the supply is not catching up. 

As stated earlier, if you were uncomfortable with the pullback in September, it means your portfolio is not aligned to your risk profile or investment horizon.

Use the current rally to realign your portfolio to your investment goals, horizon, and risk appetite. 

I hope you found this market update useful.

Feel free to comment and share with your family, friends, and colleagues.

Arrange a Free Portfolio Review Session and receive a detailed rebalancing report.