Last week, after the PPI and CPI data, the market reacted strongly dovishly, the narrative related to lower future inflation, more rate cuts by the FED and greater chances for a soft landing won.
Table 1 summarizes returns of individual asset classes on both a weekly, May-month (MtD) and year-to-date (YTD) basis.
The amazing performance of Mag7 is still worth mentioning (despite the problems of Tesla and Apple) - see Figure 1. In May, the Mag7 loses only to Chinese shares (Hang Seng) and Bitcoin. And since the beginning of the year, the Mag7 has been losing only to Bitcoin.
Figure 2 shows the relative (to S&P500) performance of Mag7 companies after the earnings publication for the first calendar quarter of 2024. Tesla reacted the most strongly, increasing by 18.1% more than the S&P500 since April 23 (in absolute terms it increased by 22.66% in this period).
Last week, Bitcoin increased by 10.14%, and in May it increased by 11.22% - see Figure 3. But monthly increases of 10% are nothing spectacular here - although the previous 6 weeks in a row were negative.
We have had a strong rebound in Chinese shares since April 19, 2024, but after the Hang Seng dropped by almost 50% (since 2021) - any rebound is possible… The question is whether the current increases are just a rebound or a change to the permanent upward trend. The Hang Seng rebound from October 31, 2022 to January 27, 2023 was as much as 54.5% - and did not change the trend... see Figure 4.
Bonus chart – comparison of Chinese Tech shares to US Mag7 – see Figure 5.
Comments