• Weekly Overview of Global Markets

Market Review and Outlook

Weekly performance of major asset classes: Gold> Crude Oil> US stocks> Hong Kong stocks> US dollars> US bonds

Stocks: Stocks soar as the S&P 500 breaks records despite early losses on Wednesday. The Dow Jones Industrial Average sees a rise of over 1%. The final day of Q1 trading ends with a mixed bag among mega-cap companies, with laggards like Tesla (NASDAQ: TSLA) seeing gains while Nvidia  (NASDAQ: NVDA) takes a hit. For a deeper dive, check out the "Weekly Hot Topics" section below.

Gold: Gold prices continue to climb despite the US Treasury yields and dollar strengthening. Last week, hawkish comments from Fed board member Waller and strong economic data failed to put a damper on gold's rise to a historic high of $2,225. Though technical indicators show an overbought RSI and a possibility of a pullback, the upward trend of gold still holds. In the event of a dip below $2,200, the support level of $2,146, the high point on December 4th, may come into play.

Crude oil: Last Thursday, oil prices surged over $1 per barrel as OPEC+ continued production cuts, Russia's energy infrastructure faced ongoing attacks, and the prospect of reduced US drilling activity loomed. Brent crude saw a rise of 2.4% last week, while WTI increased by approximately 3.2%, with both benchmarks logging a third consecutive month of gains. SEB analysts predict that US inventory growth will remain below normal levels, indicating a slight deficit in the global oil market, which may provide support for Brent crude prices.

Note: The weekly performance of major asset classes is ranked based on the weekly change in the asset class as shown in the table above, with ">" indicating the ranking from highest to lowest. US bonds are ranked based on the change in futures prices. Past returns do not guarantee future returns.

Data source: Bloomberg. Date as of April 1st, 2024

• Weekly Hot Topic

Stocks, Bitcoin, and Gold Hit Record Highs: Is Further Upside Ahead?

Despite high expectations for 2024, the strong market rebound in the first quarter has caught many investors off guard. Stocks, Bitcoin, and gold have all reached new highs, with the S&P 500 rising by an impressive 10% in Q1, its best start since 2019. It's important to note that this rally isn't solely driven by a few large tech stocks - apart from real estate, all sectors in the S&P 500 have seen gains.

• AI Leads the Bull Market

More than half of the stocks in the S&P 500 have hit 52-week highs, and the impressive performance of AI-related stocks has contributed to the upward trend that began last spring. For example, Nvidia (NASDAQ: NVDA), which produces AI technology chips, saw its Q1 stock price surge by approximately 87%. Other semiconductor stocks, including AMD (NASDAQ: AMD), Applied Materials Inc. (NASDAQ: AMAT), and Micron Technology (NASDAQ: MU), have also seen gains of over 30%. It's worth noting that Super Micro Computer, which joined the S&P 500 this month, has seen its stock price rise by a staggering 254% since the beginning of the year.

• Bitcoin and Gold Also Perform Well

The introduction of a Bitcoin ETF in January triggered a cryptocurrency buying spree, with Bitcoin rising by an impressive 58% so far this year. Gold, which is widely regarded as an excellent hedge asset due to factors such as central bank purchases and expected interest rate cuts, has risen by approximately 8% in the first quarter. In March, near-month gold futures rose by 8.4%, marking the largest monthly gain since July 2020.

• Will the U.S. Stock Market Rally Continue?

The strong start to the year has some investors concerned about the possibility of future returns becoming increasingly difficult to achieve. A recent monthly survey by Bank of America showed that fund manager bullish sentiment reached its highest level since early 2022 in March. The survey also revealed that fund managers' stock allocations and risk preferences are at their highest levels in years. Let's analyze this situation from a historical data and company earnings perspective.

Historical data shows that the stock market is fully capable of sustaining this momentum. Analysis of the Dow Jones Market data on the index's performance since 1950 shows that when the S&P 500 rises by 8% or more in the first quarter, there is a 94% chance that the index will rise for the rest of the year, with an average gain of 9.7% over the next three quarters.

However, some investors still doubt whether the potential strength of corporate profits can keep up with investors' optimistic sentiment. If the fundamentals fail to keep up, this momentum may quickly reverse. Analysts predict that S&P 500 index component companies will achieve earnings growth for the third consecutive quarter. According to FactSet data, first-quarter profits are expected to increase by more than 3% compared to the same period last year, with earnings growth of 11% this year.

Regarding valuations, according to FactSet data, the expected P/E ratio for S&P 500 component stocks in the next 12 months is around 21 times, while the five-year average is 19 times. In other words, the current market is not cheap, and if companies fail to achieve expected profits, the market may appear overvalued, and some stocks may face the risk of a pullback.

Overall, the majority of investors remain optimistic about the stock market. Strong corporate profits in the US, enthusiasm for artificial intelligence, and hopes for a Fed rate cut provide investors with ample reasons to keep buying. Mark Hackett, the Chief of Investment Research at Nationwide, believes that market momentum and a robust economic foundation could drive the S&P 500 higher for the remainder of this year.

• Important Events Outlook for This Week

Non-farm payroll

This Friday, the US Department of Labor will release the non-farm payroll data, and according to CNBC's Jim Cramer, the data is expected to be strong. The current economy is still experiencing relatively high growth, and there haven't been as many large-scale layoffs as many had anticipated. Cramer believes that the market is already fully prepared for the highly anticipated employment data, so if the labor report is more moderate, we will begin the earnings season on a positive note.