Pictet Group
Weekly house view | Down but not out
The week in review
The S&P 500[i] wavered last week, when it dropped 0.1% (in USD) as a result of profit-taking on major semiconductor stocks. But the small-cap Russell 2000[ii] did better, rising 1.3% (in USD), despite a climb in US Treasury yields. Over Q2 as a whole, the S&P 500 gained 4.3% and the Nasdaq[iii] 8.5% (in USD) whereas the Russell 2000 fell 3.3%. Taking the French elections in their stride, the Stoxx Europe 600[iv] rose 1.5% (in euros) last week, although France’s CAC 40[v] slumped by 2% (in euros) to record its worst quarter in two years. European bond yields went up and spreads on French debt over German Bunds rose modestly as market participants went into wait-and-see mode. European credit spreads actually narrowed slightly, although French issuers still pay a higher risk premium than a month ago. In currencies, the yen weakened further against the USD, falling at one stage to its weakest level since 1986. Gold added slightly to its 2Q gains last week.
Elections
In a blow to President Emmanuel Macron, Marine Le Pen’s Rassemblement National (RN) won round one of France’s parliamentary elections, but an absolute majority is far from sure at next week’s run-off. In the US, Joe Biden vowed to stay in the presidential race despite a weak debate performance.
Key data
The final estimate of Q1 GDP growth in the US was an annual 1.4%, a significant decline from 3.4% in Q4 23. The core PCE index eased to an annual rate of 2.6% in May, down from 2.8% in April. US personal income rose 0.5% in May on the month while personal spending rose 0.2%. Inflation for the Tokyo region surprised to the upside in June, with the core consumer price index rising an annual 2.1%, up from 1.9% in May. Japanese industrial production rose a strong 2.8% in May month over month, while retail sales advanced 3.o%. The official Chinese purchasing manager index for manufacturing remained unchanged at 49.5 in June, but the private Caixin manufacturing PMI rose slightly from 51.7 to 51.8, the highest reading since June 2021.
[ii] Source: Pictet WM AA&MR, Thomson Reuters. Past performance, Russell 2000 (net 12-month return in USD): 2019, 25.5%; 2020, 20%; 2021, 14.8%; 2022, -20.4%; 2023, 16.9%
[iii] Source: Pictet WM AA&MR, Thomson Reuters. Past performance, Nasdaq Composite (net 12-month return in USD): 2019, 36.7%; 2020, 44.9%; 2021, 22.2%; 2022, -32.5%; 2023, 44.6%.
[iv] Source: Pictet WM AA&MR, Thomson Reuters. Past performance, STOXX Europe 600 (net 12-month return in EUR): 2019, 27.6%; 2020, -1.5%; 2021, 25.5%; 2022, -10.1%; 2023, 16.5%.[v] Source: Pictet WM AA&MR, Thomson Reuters. Past performance, CAC 40 (net 12-month return in EUR): 2019, 30.5%; 2020, -5%; 2021, 31.9%; 2022, -6.7%; 2023, 20.1%.