Bassanese Bites: Buyer exhaustion – May 03 2021

Global markets

Global equities struggled to move higher last week even in the face of good economic, policy and earnings news – suggesting an element of ‘buyer’s exhaustion’ has perhaps crept into the market. Is all the good news now priced into the market? Is there anyone still on the sidelines waiting to buy?

The U.S. Q1 GDP surprised on the upside with a solid 6.5% annualised growth rate underpinned by the latest round of stimulus cheques that boosted consumer spending. The bad news is that U.S. quarterly GDP growth has likely peaked (6.5% annualised growth is unlikely to be repeated any time soon!), though the good news is that growth should still be fairly solid in the quarters ahead. Despite the red hot economy, the Fed reiterated its view that it’s too early to talk about tapering bond purchases, much less bringing forward rate increases. U.S. bond yields, accordingly, remained fairly well contained.

The U.S. Q1 earnings reporting season rolled on, with the tech giants easily beating expectations – which appeared such a poorly held secret that they failed to rally all that much. As is stands, 86% of the 60% of the S&P 500 companies that have reported so far have beaten expectations, comfortably above the 5-year average beat rate of 74%.

While equity and bond markets were becalmed, however, commodity markets remained strong -with decent gains in copper, oil and iron-ore just to name a few. Gold, alas, remained moribund.

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