After recently making new all-time highs, it’s been a slower week for US equities, with major benchmarks falling slightly. Tesla on the other hand has had a storming end to the week after declaring positive earnings per share growth alongside Elon Musk announcing that a cheaper electrical car model was on schedule for launch next year. This led to Tesla’s share price rising 22% on the day. The meteoric rise meant that Elon Musk’s net wealth increased by $34 billion in a single day, given his large shareholding in Tesla. Even before this rise he was considered the world’s richest person, and his position was strengthened after the large rise on Thursday.
The US Fed beige book, published eight times a year, gathers economic information from each of the 12 Fed districts giving the US Federal Reserve a detailed outlook ahead of their policy meeting. It found the US economy growing modestly, manufacturing weakness had become more widespread across the districts and wage growth showed signs of cooling. The US Fed will meet again on the 7th of November as policymakers appear to be cautious in their approach to reducing interest rates; a 50bps rate cut may not be as likely at this meeting.
“Gold Glitters” is the new catchphrase in markets as gold prices reached another record high. Gold has been spurred on by rising geopolitical events and concerns around the increasing US fiscal debt with analysts predicting that gold prices could even hit $3000 per ounce next year. The upcoming US election has betting markets swinging frequently with Trump and Vice President Harris battling for Presidency which has also strengthened the case for Gold. In what is expected to be a closely fought battle, the latest polling and betting markets are beginning to point towards a victory for Trump.
The Bank of Canada (BoC) was one of the first major banks to cut interest rates earlier this year in June and has now cut rates four times in a row. On Wednesday there was a larger than usual change as they cut by 50bps (0.5%) to take interest rates down to 3.75% as Governor Macklem insisted “It has been a long fight against inflation, but it’s worked”. The BoC want to see a pickup in demand as sales at business have been sluggish and consumer confidence is hurting growth, but they need to be careful in order to “stick the landing” and maintain stable, low inflation.
In the UK, the buildup towards the Autumn budget on the 30th is getting tense as markets are uncertain what the Labour party are set to implement. Chancellor Rachel Reeves seemingly has the impossible task of keeping everyone happy and with UK public borrowing over the first six months coming in above forecasts by £7bn that challenge has just got harder. Reeves has stated she wants to increase spending to improve UK infrastructure which would potentially mean a hike in taxes in the form of capital gains, dividends and/or inheritance tax. We look forward to reporting on the outcome in the next weekly.
The UK’s Purchasing Managers Index (PMI) for October disappointed on Thursday as manufacturing PMI fell to 50.3 and services PMI fell to 51.8, despite both measures expected to stay flat from the previous month. We’ve now seen falling inflation and wage growth in addition to declines in PMI, the view is that the Bank of England will continue on their rate cutting path with a 25bps (0.25%) cut a near certainty at the next meeting.
In summary, it has been a week of mixed macroeconomic data, although companies such as Tesla have defied this with fantastic earnings report. Portfolios have continued to benefit from the momentum in gold, which is a key position in portfolios. Diversification within portfolios is core to our investment philosophy and allows us to capitalise on opportunities created across different asset classes.
Nathan Amaning, Investment Analyst
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