Originally published at: This week in charts – InvestEngine Insights
This week in charts 19/07/24
- Biden’s odds collapse
This week has been a chaotic one for US presidential election odds. The attempted assassination of Donald Trump at the end of last week boosted his chances of winning the presidency considerably, and Thursday saw Joe Biden announcing he’d been diagnosed with COVID.
While Biden and Trump looked almost neck-and-neck as recently as early June, a disastrous debate performance, the assassination attempt, and the COVID announcement have seen Biden’s odds plummet to under 20%. Kamala Harris is now seen as more likely to win the presidency than Biden. But both Democratic candidate’s odds pale in comparison to Trump’s commanding lead of over 60%:
Source: PredictIt, Bloomberg.
- The best week in history for US small caps
This week also saw a dramatic rotation away from US large-cap stocks into smaller stocks. The result was the best 7-day returns in history for the US small-cap index the Russell 2000 against the (large-cap) S&P 500 index:
Source: Bloomberg
This rotation came on the back of lower-than-expected inflation data, which boosted hopes of rate cuts. Lower rates are seen as good for smaller companies, which have more floating rate debt – according to research from Apollo, the S&P 500 has 27% of its debt as floating rate, versus 60% for the Russell 2000. Small-caps also tend to be more domestically focused, so have been benefitting from the increasing odds of a second Trump presidency, given his more isolationist trade policies.
- ECB rate decision
The European Central Bank (ECB) kept rates on hold on Thursday, at 3.75%, which was in line with market expectations. The central bank gave little indication of how likely it was to cut rates in coming months, saying that it was “not pre-committing to a particular rate path”.
Source: Bloomberg
Markets are still pricing in a roughly 80% chance of a rate cut at the next meeting in September.
- US market concentration
The largest 10 stocks in the US now make up 35% of the market, which is causing many investors to question whether the US is looking too risky. Our most recent managed portfolio webinar on Wednesday (as well as our half-year commentary) explores our outlook for US equities:
Source: Bloomberg
Important information
Capital at risk. The value of your portfolio with InvestEngine can go down as well as up and you may get back less than you invest. ETF costs also apply.
This communication is provided for general information only and should not be construed as advice. If in doubt you may wish to consult a professional adviser for guidance.
Tax treatment depends on personal circumstances and is subject to change, and past performance is not a reliable indicator of future returns.