Update Equities - S&P 500 surpasses 6,000 points
The past two weeks have been rather eventful. We witnessed another rate cut by the US Federal Reserve (Fed), new insights into Chinese stimulus measures, US inflation numbers, numerous company earnings reports, and of course, Trump's re-election. Against this backdrop US markets rallied, while European markets lagged.
Trump's re-election was the dominant factor, dictating market behaviour. Now that the initial dust has settled, US stock markets remain on track to set new highs. On Tuesday, the S&P 500 closed above 6,000 for the first time in history. Initially, US banking stocks responded positively, and the financials sector continues to outperform since the election, driven by expectations of beneficial deregulation. The consumer discretionary sector also performed strongly, largely due to Tesla's significant price jump. In contrast, real estate has struggled post-election, as potential higher interest rates pose a clear negative for the sector. Small and mid-cap stocks continue to outperform large caps, though the margin is narrowing over time.
Europe continues to underperform due to potential adverse effects from the US election outcome. This comes on top of already relatively disappointing economic growth and recent political uncertainty in Germany.
Despite macro-economic and political shifts, companies are still publishing quarterly results, although the peak of the season has passed. This week, German pharmaceutical Bayer reported disappointing numbers, with both revenue and operational profit lower than expected. The Crop Science segment notably underperformed. The company lowered the its full-year operational profit guidance, disappointing investors.
Biopharmaceutical AstraZeneca has faced challenges recently, notably an ongoing investigation by Chinese authorities into current and former employees, creating a negative overhang. The company already flagged last week that the investigation targets individual employees rather than the company itself and remains committed to China. Third-quarter results were strong in terms of revenue and profitability. Despite a pipeline setback, management sounded confident for the remainder of this year and for 2025. They also announced that the US market will be key in achieving the ambitious 2030 revenue target and as a result, plans to increase US investments.
Shopify experienced a price surge of over 20% after delivering strong figures. The Canadian company, which provides an e-commerce platform primarily for small and medium-sized businesses, saw accelerated revenue growth in the third quarter, along with improved margins. Gaining market share has been supportive, and the outlook for the last quarter of the year exceeded estimates.
Mark Weijers