USA
The U.S. is currently in the midst of an election campaign. As autumn approaches, the elections will increasingly influence Wall Street quotations, including currencies, commodities, and more. Geopolitics, it seems, currently dominates the financial market, with all eyes on when Powell will begin reducing rates.
While Powell anticipates only one rate cut this year, analysts are calling for two from the Federal Reserve, but the Fed remains firm due to strong U.S. unemployment indicators. With inflation decreasing, analysts expect a rate cut. Thus, the market is factoring in cheaper money regardless. We witnessed the U.S. market rally continue: both NASDAQ and S&P500 hit new all-time highs in the Q2. We are now entering the Q3, which historically varies. July usually sees growth, showing about a 2% increase since 1978, while August and September are typically down months. Given the aggressive presidential race in the U.S., we might see both pleasant and unpleasant surprises. Nonetheless, we expect a muted quarter, keeping an eye on the major U.S. companies delivering top reports. The hype on AI, pharma, and biotech sets a high target for the upcoming quarter.
ASIA
China continues a positive trend following a significant correction in the market after 2021-2022. We are witnessing the first year of growth and stabilization in the real estate market. The Chinese market has stopped falling, giving investors hope for a robust recovery. We saw this in the Q2 and expect China to deliver strong economic indicators (forecasted at 4.5% this year and 5% next year). Chinese indices will appear more frequently in our portfolios, with a growth potential significantly higher than that of the U.S. We will continue to monitor and add Asian securities to our portfolio.
Our main concern is the falling yen in Japan, which regulators will need to address. We expect intervention from the Bank of Japan. In general, a weak dollar, expected after the rate cuts, might support the Japanese yen. Meanwhile, Japan is facing several challenges: currency devaluation, a declining real estate market, and lackluster economic performance.
EUROPE
Europe also has many elections this year, with all eyes currently on France. Across Europe, more right-wing, conservative, and strict leaders are coming to power, leading us to expect some market instability. There are corrections in the DAX and Euro Stoxx, but the European economy remains highly diversified and strong. Despite high debt, shares of some European companies are growing significantly. We particularly see robust growth in Germany, which nearly mirrors the broad U.S. market (S&P500 index). The DAX resembles the S&P 500 market, so we anticipate increased volatility in Europe this quarter amid various country elections.
GOALS
Our plan for the Q3 is to execute all ideas acquired last quarter. We expect growth in commodities, betting on oil, gold, silver, and sugar, as well as on the U.S. technology sectors. Having worked vigorously last quarter, we now anticipate realizing these efforts. Our goal remains to earn about 30% for the fund this year, and the first half has set us on this run-rate. We will strive to maintain this track and achieve around 30% in 2024.
