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Super Tuesday ahead

César Pérez Ruiz, Chief Investment Officer, Pictet Wealth Management.


The large-cap S&P 500 rose 1% last week (in USD), meaning that the index put in a positive performance in 16 out of the past 18 weeks, something not seen since 1971. As usual last week, a large part of these gains came from the tech sector. Indeed, the tech-heavy Nasdaq advanced a more robust 1.8% (in USD) on the week to reach a record high. Inflation figures were one focus of attention, with price trends in the US seen as continuing to point to Fed rate cuts around the middle of this year. The January price consumption expenditure (PCE) report was a mixed bag, with core prices gaining on a monthly basis, but US Treasury bonds reacted calmly, and even rallied on reassurance from the Fed that its quantitative tightening (QT) was not causing strains in financial markets. European bond markets were a bit more downbeat on data showing that inflation was not coming down as fast as expected. Gold prices rose given optimism that Fed rate cuts were on track.


The Hamas-Israel conflict passes its 150th day of fighting this week, with prospects of a ceasefire hanging in the balance. The conflict has pushed foreign policy up the agenda in the race for the White House.


Annual PCE inflation in the US slowed to 2.4% in January from 2.6% in December. ​ The headline PCE rose at a monthly rate of 0.3% in January up from 0.2% in December, while the core PCE increased 0.4%, up from 0.2%. Estimates of US GDP growth were revised down slightly from an annual 3.3% in 4Q 23 to 3.2%.

Euro area consumer inflation eased to an annual 2.6% in February from 2.8% in January. Core inflation was 3.1% in February, down less than expected from 3.3% in January. German headline inflation slowed to an annual 2.7% in February from 3.1% the month before, its lowest rate since mid-2021. The European Commission’s economic sentiment indicator weakened slightly to 95.4 in February from 95.8 in January.

Japanese industrial production fell 7.5% in January from a month earlier, a reversal of the 1.4% increase seen in December. Retail sales in Japan rose an annual 2.3% in January, more than expected.


The US presidential race reaches a critical juncture this week with votes in 15 states on Super Tuesday, which could wrap up the primaries for both parties. Geopolitical tensions, a growing factor in the race, have had a muted impact on oil prices, though they rose late last week ahead of a decision by OPEC+ to extend production cuts. We like gold as a hedge against geopolitical risk.

We are in a momentum market, though investors are penalising companies that miss expectations, with one software company’s shares falling almost 20% in one day last week on weak guidance and news its CEO will retire. We like Japanese stocks on a selective basis.

US jobs data on Friday will be crucial for gauging the labour market as inflation gets closer to levels that will allow the Fed to cut rates. We expect the Fed, ECB, SNB and BoE to cut from June. We like investment grade corporate bonds and note some are trading at or below their issue price.


Author LFI

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