Close this search box.

Weekly Market Recap | 07/01/24

What happened last week

  • Reversion Price Action: Year-to-date equity trends continued their reversal last week; small caps and internationals led U.S. mega-cap technology.
  • U.S. Debate: Biden’s poor showing drove more of a reaction in U.S. rates than in equities; monitoring developments this week for signs of a potential replacement.
  • French Elections: Tail outcome for markets seems to have been averted for now, with far-right posting results just short of a majority; European equity relief rally ongoing.

What we’re watching this week

  • Labor Market: Friday’s jobs report and Tuesday’s job openings data are important for our labor market view.
  • Politics: Watching messaging from Democrats closely as well as the coming second round of the French election next weekend.
  • Monetary Policy: Powell, Lagarde, and other global policymakers are speaking at the annual central banking conference in Sintra.

Horizon’s Investment Management Views

The investor rebalancing we flagged in last week’s note was evident in equity price action as the strong second quarter came to a close. The NASDAQ 100 and the tech sector declined while many of the quarter’s laggards, including domestic small caps and international equities, registered modest gains. Zooming out, it remains a very narrow market led by the largest U.S. tech names that also happen to be the market’s preferred expression of the AI-theme. We think the last few weeks represent just a blip in the bigger picture, but the team will be watching to see if the coming earnings season, set to kick off on July 12th, can shake the overwhelming trend in equity markets for the last 18 or so months.

In terms of news flow, last week was dominated by President Biden’s poor showing in Thursday night’s Presidential Debate. Prediction markets have moved heavily in favor of former President Trump after the event; in capital markets, bonds reacted more strongly than stocks to the debate. The 30-year Treasury yield climbed the most since the blowout jobs release in early April, with ~80% of last week’s 16 bps move occurring in Friday’s session. Small caps, another darling of the 2016 election, were also likely helped along by last week’s debate, albeit to a much lesser extent. Notably absent from the beneficiary list was the dollar, which declined on Friday and was flat on the week despite its strong recent correlation with yields. We view this as a good reminder that investing around politics is tricky and that analogues, while useful, are never perfect out of sample.

Turning to this shortened week, we will update our view on the labor market with the fresh reports on payrolls and job openings. We are keenly watching the Democrats’ messaging, as well as any high-quality polling data, after last week’s debate. Developments around the French parliamentary elections are also top of mind. Rounding out the week, the annual global central bank Sintra conference will feature the likes of the Fed’s Powell and the ECB’s Lagarde.

Emerging markets (EM)  is a term that refers to an economy that experiences considerable economic growth and possesses some, but not all, characteristics of a developed economy. The commentary in this report is not a complete analysis of every material fact with respect to any company, industry, or security. The opinions expressed here are not investment recommendations, but rather opinions that reflect the judgment of Horizon as of the date of the report and are subject to change without notice. Forward-looking statements cannot be guaranteed. We do not intend and will not endeavor to provide notice if and when our opinions or actions change. This document does not constitute an offer to sell or a solicitation of an offer to buy any security or product and may not be relied upon in connection with the purchase or sale of any security or device. Before investing, an investor should consider his or her investment goals and risk comfort levels and consult with his or her investment adviser and tax professional. Equities are represented by the S&P 500 Index, which is a market- capitalization-weighted index of the 500 largest U.S. publicly traded companies. The Nasdaq 100 Index is a stock index of the 100 largest companies by modified market capitalization trading on Nasdaq exchanges. Small Caps are represented here by a broad-based small cap index; contact us for more information References to indices or other measures of relative market performance over a specified period of time are provided for informational purposes only. Reference to an index does not imply that any account will achieve returns, volatility, or other results similar to that index. The composition of an index may not reflect the manner in which a portfolio is constructed in relation to expected or achieved returns, portfolio guidelines, restrictions, sectors, correlations, concentrations, volatility or tracking error targets, all of which are subject to change. It is not possible to invest directly in an index.

This commentary is based on public information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such.

Horizon Investments and the Horizon H are registered trademarks of Horizon Investments, LLC.

© 2024 Horizon Investments, LLC.

You are now leaving this website to go to