C (2:01)

That's the core challenge right now. US retail sales jumped 1.7% in March, the biggest leap in over three years. This suggests consumers are still willing and able to spend, fueled partly of course, by higher fuel prices, but also demonstrating solid underlying demand. However, at the same time, consumer sentiment is declining and crucially, inflation expectations are ticking upwards. People are becoming concerned about the cost of living again, and that concern is starting to bite. Despite the current willingness to spend, it paints a picture of a consumer who is cautiously optimistic, perhaps.

B (2:40)

Interesting. And how did this play out in the equity markets then?

C (2:44)

US equities generally pushed forward, led by the NASDAQ hitting new records. Enthusiasm for AI continues to be a powerful force, and the earnings season so far has been exceptionally Strong. According to FactSet, around 84% of S&P 500 companies have beaten expectations so far with earnings growth exceeding 15% year on year. This reinforces the narrative of corporate resilience. There, however, the Dow Jones lagged, indicating some vulnerability among more cyclical industries.

A (3:18)

Okay, then, let's turn to Europe because

B (3:20)

the story there appears quite different.

C (3:23)

Indeed, European equities saw a noticeable downturn last week. Geopolitical risks, specifically concerning the Middle east and the crucial shipping lane of the Strait of Hormuz, contributed significantly to the sell off, deteriorating business and consumer confidence, particularly in Germany and France. Fascinating. Further dampened investor spirits. Defensive sectors like utilities and telecoms outperformed, highlighting some cautiousness among investors.

B (3:50)

While we're talking about cautiousness, let's shift to fixed income. Were bonds able to offer a kind of safe haven?

C (3:58)

Not entirely. Government bond yields actually rose across major markets. U.S. treasuries had negative returns as stronger economic data and rising inflation signals diminished their appeal as a safe asset. Credit markets were comparatively relatively resilient, outperforming Treasuries, thanks to strong corporate fundamentals and healthy earnings.

B (4:19)

There was also some interesting news regarding debt levels in Europe. Can you elaborate on that, Roman?

C (4:27)

Certainly. Greece is poised to lose its title as the Eurozone's most indebted nation to Italy by the end of this year, according to official budget data and officials. Greece has made impressive strides in reducing its debt through fiscal discipline and economic growth, whereas Italy's debt ratio is unfortunately continuing to climb. It's a striking turnaround, showcasing the impact of sustained reform efforts.

B (4:55)

Yeah, it's impressive indeed. Now, Roman, turning to currencies. The US Dollar held firm, I understand.

C (5:03)

Yes. The dollar benefited from the robust U.S. data and elevated inflation expectations, reducing expectations for immediate monetary easing. The Japanese yen, however, continued to weaken, nearing the 160 level against the dollar. Officials have expressed concern about speculative activity there and oil price volatility, hinting at a possible intervention. The Euro was pressured by weaker confidence indicators, while Sterling received mixed signals.

A (5:33)

All right.

B (5:33)

Finally, Roman, looking ahead, what are the key events investors should be monitoring today and later this week?

C (5:41)

This is a pivotal week. We have a flurry of central bank meetings. The bank of England, the bank of Japan, the ECB and the Federal Reserve all deciding on interest rates. And while no changes are currently anticipated, the accompanying guidance will be absolutely crucial. Also, we have a heavy dose of earnings reports with results from the Magnificent Seven taking center stage. Investors will be scrutinizing these reports for evidence that the high valuations are justified, particularly regarding AI investments and margins as sustainability. However, the start of the week has been good so far with Asian markets rallying on reports of a new effort to find a solution to the Middle east conflict and especially Asia tech rallying hard and maybe. Lastly, we just got the latest GFK German consumer confidence numbers for May and they came in lower than expected, actually on the lowest levels since February 2023. That's it from me.

B (6:38)

All right, so another busy and exciting week ahead. Thank you very much, Roman, for the roundup today.

C (6:43)

Thank you very much, Jan. Always a pleasure.

A (6:49)

And now Markus, good morning to you as well. Great to have you on the show today.

D (6:53)

Good morning, Jan. Pleasure to be here.

A (6:55)

The S&P 500 has staged quite a

B (6:57)

rally over the past weeks. What is your take on the current situation?

D (7:02)

Yeah, The S&P 500 has been up the last week and also like the previous three weeks, we've seen the previous three weeks we've seen the S&P 500 crossing above the 40 week moving average again and at the same time doing gains of 3% or more for each week. We have analyzed the historic pattern and we have seen that if this happens, basically it occurred nine times in the past. We see a median return over the following 50 weeks of around 34% in the S&P 500. And basically that adds to our positive view of the equity markets.

B (7:47)

All right, that sounds encouraging.

A (7:48)

We are also seeing or in particular

B (7:50)

seeing strong upside momentum in the Nasdaq recently semiconductors have been rising strongly. How's your technical view on that?

D (7:59)

Yeah, similarly to the S&P 500 we've also seen like that rise in the Nasdaq and also in the semiconductors. The so they are both up like the fourth week in a row with very strong gains. The NASDAQ has the uptrend intact and shows strong momentum. And there is the rally in the semiconductors which actually continue to outperform or persistently outperform the market. So we see that themes to continue in the future.

A (8:37)

And lastly Markus, this month gold seems

B (8:40)

stuck in the 4,600 to 4,800 US dollar range. What is your current take on the precious metal?

D (8:47)

Well, we've seen the sell off in gold in the past and basically now we're seeing that recovery from the sell off. We have seen a fourth week also there of higher lows in the gold market. So the prices are not the lows the market is doing. Each week is higher than the previous week. So that indicates recovery there in the market. And we are also seeing the 40 week moving average intact. And that leads us to the conclusion that gold is going further upward on the recovery.

B (9:24)

Very nice. Great. Thanks very much, Markus. Really good to hear your latest thoughts. As always.

D (9:30)

Thanks for having me, Jan.

A (9:35)

And that is all for today. A big thank you to Roman and Markus for sharing their perspectives, and thank you all for tuning in. If you enjoyed today's show, don't forget

B (9:44)

to subscribe if you haven't already. And please also leave us a review on whichever platform you like to listen on.

A (9:51)

And do join us again on Tuesday, when Roman will be back, but this

B (9:55)

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.

E (10:12)

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 forward/legal podcasts for further other important legal information.