I like stuff I can touch, drink and inject

A mixed week for stock markets. The S&P 500

reached all-time fresh highs on Wednesday. Woop-di-doo. But before we celebrate too much, markets are holding their breath, waiting for the US jobs data, which will come out on Friday shortly after I press Send.

Why the focus on the jobs data? Interest rates. If jobs data is strong then this points to a strong economy, which will not ‘chill out’ inflation

and so put pressure on the Fed to raise interest rates sooner than is anticipated. Which companies don’t like and heavy borrowers and spenders like tech firms can suffer as a result.

However, soft jobs data (fewer jobs) could be positive for stock markets as this would add pressure on the US Fed to cut interest rates to get the economy moving at September’s meeting. It’s a very finely balanced tightrope – do markets choose to focus more on potential lower rates (YAY), or the fact that there are fewer jobs, fewer people earning, lower household spending power, lower spending on stuff and, hence, worse corporate results (BOO)? The reaction could be either relief or gloom.

As an unwelcome side plot, tension in the Middle East is flaring again but – so far – markets are broadly taking it in their stride. Brent crude is around $83 a barrel, down from a peak of $100 a few weeks ago.

The AI and tech story remains wobbly 

On the one hand, companies are earning serious amounts of cash. SpaceX reported revenues of $7.8 billion for the last three months – 92% higher than the previous year. Tick. But they’re also spending money like it’s going out of fashion. Over $18 BILLION in three months since you ask. Which freaks investors out.

In a stronger story, Palantir also reported strong results for the last quarter, with nearly $2 billion of revenues described as “otherworldly” by the CEO.

Valuations are high and most of us arguably have too much exposure already to both technology and the US. However, Exchange Traded Funds (ETFs) can be an interesting way to get exposure to some firms without betting the house on single stocks. If you want to own Palantir, it’s only about 0.05% of the MSCI World Index

, just 0.5% of the S&P 500 Index but it’s over 4% of the MSCI World Software & Services Index, for example. (In case you’re wondering, that’s not a hint. I don’t own Palantir. Just FYI).

Despite nerves and wobbles, retail investors are still buying tech. Next week, we’ll bring you all best-selling funds across major platforms for July, but looking at the data today confirms that VanEck’s Semiconductor ETF is a new entrant, as investors buy into the recent dip. Other bestsellers Allianz Technology and Polar Capital Technology remain solid, broader Investment Trust picks for the tech sector.

I like stuff I can touch and drink and inject

No, not a quote from a rock star but a summary of market results this week, as investors debate the merits of investing on Planet Earth and not the Cloud.

Gold is always a barometer of nervousness. If we feel mistrust towards governments, markets and institutions, we like gold because we can touch it and stash it under the metaphorical bed. Gold is up over 5% this week, a sign that people are feeling uncertain. Also in the old-school camp, BP announced blistering results this week, driven by higher oil and gas prices and announcing profits of $5.7 billion for the 3 months to June.

Diageo (the drinks maker) also announced better than expected profits. Well done Great Britain for playing our part – Guinness sales here were strong, although US tequila sales fell by 21%. The Americans have always been rubbish drinkers, although the official line is that it’s a shift away from premium brands such as Don Julio to cheaper stuff. I’m surprised Gianni Infantino didn’t strike a sponsorship deal to get footballers to neck tequila in the hydration breaks. 

And finally, Eli Lilly and Company delivered great results as the Western world jabbed $9.94 billion of Mounjaro into our sooner-to-be skinnier arms. 

For those looking for a technology antidote, City of London Investment Trust remains a bestseller and is jam packed full of things you can smoke, drill, count and swallow. Won’t shoot the performance lights out but is a Steady Eddie and pays out around 4% income a year and has been doing its thing since 1891. The year that Carnegie Hall opened with guest conductor Tchaikovsky, the first game of basketball was played and the year when the first permanent telephone line between London and Paris opened for public use, since you ask.

Have a great weekend, everyone. More hot weather coming our way. My poor plants all look like a collection of Pringles and sticks but at least the Solent doesn’t feel like an ice bath.

Holly