Author — Martin Young, CEO of Farringdon Asset Management

Global Macro Review

Major markets rallied as S&P 500 hits all-time high, FTSE 100 try to break new highs and crude see prices increase significantly.

US Market

• Goldman Sach sees S&P 500 index rising to 5200 by end of 2024, estimates up from 4700.
• Market has been primarily driven by magnificent 7 stocks Microsoft, Alphabet, Meta, Amazon, Nvidia, Apple and Tesla.
• The magnificent 7 Stocks now make up a record of 29% of the S&P 500.
• In 2023, the market gained 12% but would only have risen 8% without these 7 stocks on and equal weighted basis according to Forbes.
• It is also worth noting that the same 7 magnificent stocks were also primarily responsible for S&P 500 decline in 2022.
• Farringdon view is that the current market is driven by AI companies.
• All magnificent 7 stocks have been using AI to boost their productivity and this has resulted in increased profits.
• One example would be Nvidia, where the increase demand for AI chips led to increasing profits and stock price rallied significantly.

Japanese Market

• Japan has fallen into a recession with two consecutive quarters of negative growth in the 2^nd half of 2023.
• Germany has overtaken Japan as world’s 3rd largest economy.
• Farringdon view is that with the German economy in dire state, it is likely that Japan will move back up to 3^rd spot soon.
• At current level of the Nikkei 225, it is worth noting that it is still near all-time high record that was set 34 years ago.
• The main drivers of the Japanese market are the technologies and chips companies.

UK Market

• The United Kingdom announced recession, where the economy dropped by 0.1% and 0.3% in the third and fourth quarter.
• Farringdon view is that the recession is unlikely to persist as consumer spending has increased substantially in January 2024.
• It is also possible for the Office of National Statistics to revise the economic status in the upcoming months as this has happened before.

Farringdon View On Overall Market

• Heightened volatility is due to recession announced by Japan, United Kingdom and Germany.
• With the ongoing expectation of Fed cutting interest rates, markets are also trying to anticipate the direction where markets will head.
• Equities should preform better in the upcoming months.

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Farringdon Capital Ltd is incorporated in the Dubai International Financial Centre (DIFC) under number 4190, and regulated by the Dubai Financial Services Authority (DFSA).

The information contained in this document is for information only and should not be taken as a recommendation to buy or sell. Investors are reminded that past performance is no indication of future performance.