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- [00:02]
A
Good morning from Julius Baer. Today is Monday the 1st of June. My name is Jan Bob and this is Julius Baer's Moving Markets Podcast. Nvidia is entering the Windows laptop market to challenge intel and AMD. Japanese yields are at the highest in 40 years, and one Asian stock market seems unstoppable, hitting yet another record high on Monday. I'll be unpacking that and the rest of the latest market moves with Bernadette Anderko shortly. And then it's over to Manso Puccinci, head of our technical analysis team, for his Monday update. Before we get going, I'd like to flag the latest View beyond podcast, which was published over the weekend. After a period of relative calm, gold has reemerged as a focal point for investors amid geopolitics, shifting central bank strategies and evolving global demand. Our colleagues Carsten Menke and Chris Irvine are discussing the drivers behind gold's remarkable run and what the outlook for the yellow metal is after the recent weakness. The episode is called Waiting for the Gold Rally to Resume and you'll find it on the Moving Markets Podcast channel. Now though, let's catch up with the latest market news. Good morning to you, Bernadette. Good morning, Jan. Bernadette the relentless enthusiasm for the AI trade continued to push global equities towards record highs last week, didn't it?
- [01:35]
B
Oh yes, indeed. US equities did close at record highs on Friday while crude oil prices slipped. We saw the Nasdaq composite and the S&P 500 closing with modest gains. The Dow Jones industrial finished up 0.72%. All three indices hit fresh all time intraday highs earlier as well. And they also all ended the week higher with the the Nasdaq in the lead with a gain of more than 2%, the S&P 500 closing 1% higher on the week, and the blue chip Dow notched a gain of slightly less than 1% on the week. And I have to say, when it comes to companies, Dell Technologies was a big winner on Friday. Its shares surged nearly 33% on the day, its best day on record after it reported a first quarter beat on both the top and bottom lines and it raised its full year guidance elsewhere. Shares of Micron Technology and Qualcomm rose 5% and 3% respectively, adding to their recent gains. And just as an idea, Micron jumped 88% in May while Qualcomm rose close to 40% in May. And to illustrate how much tech was in the lead In May's rally, one technology sector fund hit a new 52 week high on Friday, moving up nearly 20% on the month.
- [02:45]
A
That is impressive. Now, Friday was of course, the final trading day of May. How did the broader indices fare on that basis?
- [02:53]
B
Well, all three of the major averages notched gains for the month. Jan, with the NASDAQ outperforming recording an Advance More than 8% for the month. The S&P 500 finished up 5%. The Dow Jones was up almost 3% on the month.
- [03:07]
A
Now, we cannot, of course, ignore developments in Iran. There have been confused signals about whether Washington and Tehran are actually close to an agreement that would extend the existing ceasefire by 60 days. President Trump said on Friday that he was intending to make a final determination about a preliminary agreement. But a White House meeting concluded without any formal announcement. Have we heard any more?
- [03:35]
B
Well, sometimes actions speak louder than words, Yan. The US conducted several strikes against military targets in southern Iran over the weekend. Both countries have been reviewing this deal, which Trump reportedly returned to Iran with amendments. And of course, he's under pressure from his party over concessions to Tehran and also to control rising petrol prices ahead of these very important midterm elections in November. But so far, no final determination has been announced.
- [04:01]
A
Okay. Have we seen a reaction to the latest developments in Asian markets this morning?
- [04:07]
B
Well, I'd say no Yen markets seem to be looking through the war and I think they're very much believing an agreement will now be reached. We saw South Korea stocks reach a fresh record high today, bucking a mixed performance across Asian Pacific markets generally. But the benchmark Kospi broke through 8,700 points. Shares of Samsung Electronics rose more than 3% to hit an all time high. In Japan, the Nikkei 225 surpassed 67,000 points for the first time, setting a new high, although when I last looked, it had retraced from that level. Sentiment, as you mentioned, was further buoyed by Nvidia entering the Windows laptop market. It's taking on intel and Advanced Micro Devices. Shares of SoftBank Group rose 5% after the conglomerate announced yesterday plans to invest the equivalent of 45 billion euros over the next five years to build artificial intelligence infrastructure in France. Meanwhile, on the China front, the Hang Seng index rose 0.7%. CSI 300 was down just over half percent when I last looked. And weighing on the mood slightly this morning was a rally in oil prices. Yeah, brent climbed over $93 a barrel as these Middle east tensions remain elevated. And of course, efforts to reopen the Strait of Hormuza showing little progress. And oils Rebound today after its steepest monthly drop in more than six years is reviving concerns about energy driven inflation and that might complicate the recent recovery in the global bond markets.
- [05:33]
A
Of course, I can't let you go without a quick update on how Europe closed the week.
- [05:37]
B
Indeed yes, European stocks closed higher on Friday. Obviously investors were weighing the prospects for this potential deal. The pan European Stoxx 600 ended the final trading day of the month up 0.2%. Most sectors in positive territory. Although performances were mixed. Among the region's major bourses, the regional stocks Aerospace and Defence Inde closed about 1% higher after a Russian drone hit a Romanian apartment building. Obviously Romania, which borders Ukraine, is a member of both NATO and the eu.
- [06:07]
A
Finally, what should we be looking out for in the day and indeed the week ahead?
- [06:12]
B
In short, a lot. Jan, in long Today the ECB publishes its Consumer Expectations Survey that will provide an update on household inflation views. Tomorrow the Eurozone releases flash CPI estimate for May following national releases over recent days and again today. Further inflation data will be due on Thursday from both Switzerland and Sweden. In the US today we have the main manufacturing ISM survey. Tomorrow the April Jolts report will shed light on the gross hiring and separation flows that underpinned last month's solid net job gains. On Wednesday we'll have the ADP private payrolls report, Thursday weekly initial jobless claims and Friday that U.S. may employment report. With all of this data ahead, European futures currently pointing to a slightly lower open this morning, slightly more optimistic in the US Where I'm seeing a flat to slightly positive open. That's it from me, Jan.
- [07:05]
A
Wonderful. So another busy and exciting week ahead. Thank you very much Bernadette for the roundup today.
- [07:11]
B
Thanks for having me.
- [07:16]
A
And now Manso, good morning to you as well. Great to have you on the show today. Good morning, Jan. Now Manso, we heard it from Bernadette. US equities showed a strong performance in May. US equities overbought. Now.
- [07:28]
C
Yes, I think there is no discussion or no disagreement here that the US equities are overbought. It's quite interesting when we look at the returns over the past eight weeks, we see that both for the S&P 500 and the NASDAQ 100, the returns rank in the top 2%. So in 98% of all times, the returns are lower. And of course, intuitively one would think that this is a bearish sign and equities can only decline. But when we look historically, the average forward return. So for the S&P 500 is over 12 months, 17% compared to the rest of the time, but it was 7.7%. And in the NASDAQ 100 it's even more, it's 24% forward return. So once again, these signs of strong momentum are usually not a sign of a peak, but usually for one more move higher in equities.
- [08:27]
A
Interesting statistics, Manso. These star performers have been semiconductors in the past few months and software stocks have been underperforming. But on Friday, US software stocks rose by more than 5%. Are they improving as well?
- [08:43]
C
Yes. So in the software space we have seen that they have been a massive laggard since September of last year. They even declined until recently and now we see an improvement. So most likely the underperformance and the decline is over. So these stocks are starting to outperform the overall market as well, which means that the technology sector or information technology sector can outperform even further from current levels as one important subsegment of the universe is starting to outperform now as well as now.
- [09:19]
A
Investors are very focused on the upcoming mega IPOs. SpaceX, OpenAI, Antropic. Have IPOs historically been a good investment? Mansoor?
- [09:32]
C
Yes. I mean, if you want to understand IPOs, you should maybe just remember what Charlie Munger said. The meaning of IPO is it's probably overpriced. So when we look at mega IPO since 2009, we see that the best group was in the year 2009 until 2015. And even this group, which had Google go public, Facebook and so on, even this group did not manage to outperform the S&P 500. It underperformed by 2% annualized and everything else that followed after that had worse performance to the S and P founded. So most likely, and one trend we see here is that the companies go public a lot later. And the next question of course is what does this mean for the overall equity market? And here the picture is not as bad. So when we look here at these IPO dates with the mega IPOs, we see that on average the S&P 500 basically continues to rise. In the next 12 months, it rises by 10%. And the reason for this is that these IPOs, they are timed well in the sense that they only come to the market when market mood is already bullish. So nobody goes to the market when market mood is bearish.
- [10:48]
A
Yeah, makes sense. Very interesting insights, man. So many thanks. Really good to hear your latest thoughts as always.
- [10:57]
C
Thank you.
- [11:01]
A
And that is all for today. A big thank you to Bernadette and Menso for sharing their perspectives, and thank you all for tuning in. If you enjoyed today's show, don't forget to subscribe if you haven't already, and please also leave us a review on whichever platform you like to listen on. And do join us again on Tuesday, when Bernadette will be back, but this time as your host and with a fresh lineup of experts talking about what is moving markets. Until then, good luck today and goodbye for now.
- [11:38]
C
The information and opinions expressed in this podcast constitute marketing material and are not the result of independent financial or investment research. Please refer to www.juliusbear.com legal podcasts for further other important legal.