Summary
Highlights
US markets reached new record highs last week on the back of AI-driven euphoria and corporate earnings above expectations.
While markets have been driven by the large cap and tech sectors, this is also increasing concentration risks.
With some areas of the US market back to extremely expensive levels, the market could see rotations towards other less expensive sectors and regions.
In this edition
The S&P 500, the primary US equities index, touched record highs recently, led by the technology sector and the optimism around the artificial intelligence (AI) boom. A better-than-expected corporate earnings season and hopes of interest rate cuts by the Fed also supported sentiment. However, this continued uptick over the summer is fanning worries about increasing concentration risks in the US where a handful of stocks/sectors are driving returns. Additionally, the impact that new import tariffs may have on corporate earnings is still uncertain. Tariffs essentially act as a tax on consumers’ disposable income and given that the US consumer is a key pillar of the country’s economic growth, we think any weakness here could affect the economy. With uncertainty ahead, markets are expected to remain highly sensitive to macro data and Fed actions.
Key dates
01 Sep UK consumer credit, EZ labour data, Indonesia CPI | 03 Sep Fed beige book, EZ PPI, |
US labour markets, Germany |
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