Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.
NEVER knowingly uncontroversial, Elon Musk’s Twitter poll at the weekend on whether he should sell 10% of his Tesla shares, worth $20bn, is causing a stir.
Apart from the unusual nature of the question, there’s the potential market impact of such a large disposal. Not to mention regulatory scrutiny that could follow comments with this much potential to move a share price. Three years ago, the Securities and Exchange Commission looked into tweets made by Musk suggesting the company was close to a buy-out.
Musk would certainly be taking advantage of an opportune moment to sell shares. The September wobble in markets is fading into the memory as October’s rally gains ground. The S&P 500 continues to hit a series of new highs close to 4,700 as another strong earnings season and accommodative monetary policy drives shares forward. The US benchmark is up 33% on a year ago. Even the FTSE 100, facing UK-specific problems, is 23% up on 12 months ago at 7,300.
The US market is responding in large part to the Federal Reserve’s apparent willingness to keep interest rates low in the face of rising inflation. This week’s Consumer Price Index (CPI) print is expected to hit 5.8% in October, up from 5.4% last month. Even stripping out volatile items like food and energy it will be around 4.3%. Despite this, chairman Jerome Powell has said ‘now is not the time’ to raise rates even if the Fed’s $120bn bond-buying programme is on track to wind down by next summer.
The second key driver of the market is the ongoing positive earnings environment. With almost all the S&P 500 companies having now reported, more than 80% have exceeded expectations by around 10% on average. The expected growth rate for the third quarter as a whole is 40%, which compares with forecast growth of 28% at the start of the results season.
Pound: not so sound
Sterling is in focus this week after the Bank of England failed to follow through on recent hints that it would lift UK interest rates off their emergency pandemic low of 0.1%. Investors were blindsided by last week’s decision and the pound, at $1.35, is at its low point for the year. Other concerns in the UK, include an expected slowdown in GDP growth when figures for the third quarter are unveiled on Thursday. Year on year growth of 1.5% will be a reminder that the UK’s underlying growth rate, pandemic recovery notwithstanding, is sluggish.
Xi: successor to Mao and Deng
Finally, in China, the autumn plenum of the Chinese Communist Party is expected to place President Xi Jinping in the august company of Mao Zedong and Deng Xiaoping when a ‘resolution’ on Chinese history paves the way for an extended rule by China’s unchallenged leader. Recent moves, putting societal stability ahead of corporate profits, have held the Shanghai and Shenzhen markets back this year.
Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to a Fidelity adviser or an authorised financial adviser of your choice.
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