Bassanese Bites: Spot the Dot – September 14 2020

Global markets

Global equities continued to pull back last week, driven in large part by the tech-heavy NASDAQ-100 Index. Compared to the previous week’s news (SoftBank and Tesla) there was little fundamentally new that triggered the further equity sell-off – suggesting this remains nothing more than an overdue retreat in some popular U.S. tech names which (perhaps due to retail’s new love affair with call options) simply rose too far too fast. While there is a clear desire for some investors to rotate from ‘growth’ to ‘value’ stocks, bond yields stayed low and oil prices retreated last week, which makes it hard to embrace the value-biased financial and energy sectors.

At its recent peak, for example, the NASDAQ-100 was 13% above its 50-day moving average – a degree of extension not seen since May 2009. This Index has now retreated 10% in two weeks and closed just below its 50-day moving average on Friday – and just above its closing low in this retreat last Tuesday. As such the market may well start to find some support, though a further cleansing pullback might still be on the cards – without necessarily threatening the broader uptrend. Based on the advance since late March, a reasonable retreat to, say, the 38.2% ‘Fibonacci level’ would take the Index back to around 10,400 or another 6% from Friday’s close.

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