Weekly Market Update - The Beastly Party!

The bulls had a beastly party scaring the hell out of the bears this month. After a Spooky September, major US indices came back with a vengeance, rising 6-7% in October.

The markets were buoyant on the prospects of additional stimulus treats from the Biden administration in the form of a $1.75 trillion social spending framework and the $1.2 trillion infrastructure package.

The earnings season was in full swing last week, with many companies, including the tech giants Apple, Amazon, Alphabet, and Microsoft, releasing their Q3 earnings. 

Despite being decades old, Google parent Alphabet and Microsoft still are growing like start-ups. Microsoft reported a revenue of $45.3 billion with a 19% increase and earnings per share of $2.27 vs. a market estimate of $2.07. 

Google reported revenue of $65.12 billion vs. an estimate of $63.34 billion and the EPS of $27.99 per share vs. $23.48 per share.

Due to persisting supply chain bottlenecks and semiconductor shortages, Apple and Amazon's earnings were lower than market estimates. 

However, investors seemed to have looked beyond the below-par earnings and continued their buying spree. 

Both Apple and Amazon's share prices went down on Thursday but started recovering on Friday. 

Europe

The party mood spilled over in Europe as well, with the Euro Stoxx Index rising 0.77%. Individual country indices were as follows;

• Germany’s Xetra DAX rose 0.94%, 
• France's CAC added 1.44%
• Italy's FTSE MIB gained 1.14%.
• UK's FTSE 100 Index was up by 0.46%.

China 

Investors in China remain haunted by the real estate debt default crisis and the regulatory clampdowns.

A fresh set of regulations were announced targetting tech companies with more than 1 million users with a security review before sending user-related data abroad.

Both the CSI 300 Index and the Shanghai Composite Index lost around 1% last week. 

India

Despite positive global cues, Indian markets continued to decline the second week in a row due to profit-booking, high energy prices, and coal shortages.

Both the Sensex and Nifty were down by 2.49% and 2.45%, ending the week at 59,306.93, and 17,671.65

Summary and Outlook

"The scariest monsters are the ones you don't see coming."

While the bulls are still partying, hoping to end the year on a high note, a few monsters hide in the closet, waiting to come out anytime.

1. High Energy Prices
2. Potential stagflation - Weak economic growth and rising inflation
3. Persisting supply chain and inventory issues
4. Rising interest rates
5. On track Tapering
6. High valuations and earnings estimates are some of them

Although the outlook for the year is still positive, you never know when a few or more monsters could jump out of the closet to scare the bulls away. 

Now is the best time to book profits and rebalance portfolios, aligning your investments to your risk appetite. 

Stay Safe, Stay Invested.  

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