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Stock market outlook: Rally can resume even without Fed rate cuts

Published

2 weeks ago

April 28, 2024

Sagarika Jaisinghani, Alexandra Semenova, Bloomberg

Robust global economic growth may offer equities enough support to resume a record-breaking rally, even if bets on Federal Reserve interest rate cuts this year are completely abandoned.

After the best week for the S&P 500 Index since November pushed the US stock gauge back toward its record levels of March, investors are faced with a call on whether the weakness seen earlier this month was only a blip or if delayed policy easing will pull the market back down again.

The answer, some investors say, lies in the market playbook of the 1990s, when equities more than tripled in value despite years of rates that were hovering around current levels. Back then, robust economic growth provided the platform for stocks to shine, and while the global outlook is more uncertain at this point in time, there still exists enough momentum to push the stock market forward.

“You have to assess why you could be in a scenario where there’s fewer rate cuts this year,” Zehrid Osmani, a Martin Currie fund manager, said in an interview. “If it’s related to an economy being healthier than expected, that could support the rally in equity markets after the typical volatile knee-jerk reactions.”

Prior to the gains of this past week, equities had been taking a breather throughout April after initial expectations of policy easing kick-started record-breaking rallies in US and European equity markets during the final months of 2023.

Traders’ anticipation of at least six 25 basis-point Fed cuts this year at the beginning of January has since been pared back to only one as US inflation remains elevated, prompting concerns that prolonged restrictive policy would weigh on the economy and the earnings potential of companies.

Rising geopolitical risks and uncertainty over the outcome of global elections have also caused volatility to spike, driving demand for hedges that would offer protection in case the market sees a sharper rout.

Still, confidence in the global economy has strengthened this year, backed mainly by US growth and recent signs of a rebound in China. Similarly, the International Monetary Fund this month raised its forecast for global economic expansion while a Bloomberg survey shows that euro zone growth is expected to pick up from 2025.

While recent economic data reflected a sharp downshift in US economic growth last quarter, these figures should be “taken with a grain of salt” as they disguise otherwise resilient demand, said David Mazza, chief executive officer at Roundhill Investments.

“Net net, I’m still of the belief that we don’t need rate cuts to return to more bullish spirits, but I do think it’s going to be more of a grind,” Mazza said.

Some short-term pullback is seen as healthy for the S&P 500 after its rally to an all-time high in the first quarter. Between 1991 and 1998, the index retreated as much as 5% on several occasions before staging a new rally but didn’t correct by 10% or more, according to data compiled by Bloomberg.

One shortcoming of the comparison is that the index now has a far bigger concentration than in the 1990s.

The current top-five stocks — Microsoft Corp., Apple Inc., Nvidia Corp., Amazon.com Inc. and Meta Platforms Inc. — are all from the tech sector and make up nearly a quarter of the market capitalization, leaving the index vulnerable to sharper swings.

Still, there are other factors that bode well for equities.

An analysis by BMO Capital Markets showed that S&P 500 returns tend to correlate with higher yields. Since 1990, the index has posted average annualized gains of almost 15% when the 10-year Treasury yield was above 6%, compared with a return of 7.7% when the yield was less than 4%, the analysis showed.

“This makes sense to us, since lower rates can be reflective of sluggish economic growth, and vice versa,” Brian Belski, BMO’s chief investment strategist, wrote in a note to clients.

In the past week, 10-year Treasury yields have touched a high for the year of 4.74% on the back of limited policy easing prospects.

Early results from the current reporting season suggest that about 81% of US companies are outperforming expectations even against a backdrop of elevated rates. First-quarter earnings are on track to increase by 4.7% from a year ago, compared with the pre-season estimate of 3.8%, according to data compiled by Bloomberg Intelligence.

Analysts expect S&P 500 profits to jump 8% in 2024 and 14% in 2025 after subdued growth last year, data compiled by BI show.

The earnings forecast could be even higher next year in the event of zero rate cuts in 2024, said Andrew Slimmon, portfolio manager at Morgan Stanley Investment Management.

That “validates upside for equities,” given the market will look ahead to those projections, he told Bloomberg Television earlier this month.

A booming economy will continue to support stocks even in the absence of rate cuts, said Bank of America Corp. strategist Ohsung Kwon. The biggest danger to this premise will be if the economy slows while inflation remains elevated, he said.

“If inflation is sticky because of momentum in the economy, that’s not necessarily bad for stocks,” Kwon said. “But stagflation is.”

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Nio’s Onvo brand undercuts Tesla Model Y

Published

51 mins ago

May 15, 2024

Evelyn Cheng

Chinese electric car company Nio launched its lower-cost brand Onvo on Wednesday, May 15, 2024, in Shanghai, China.

CNBC | Evelyn Cheng

SHANGHAI — Chinese electric car company Nio revealed Wednesday that the first car for its new, lower-priced brand, Onvo, will be about $4,000 cheaper than Tesla’s comparable Model Y.

Deliveries for Onvo’s first car, the L60 SUV, are set to begin in September, the company said. Pre-sales began after Wednesday’s launch event.

Nio CEO William Li said he expected that Onvo would sell its cars overseas at some point, but didn’t specify when, according to an interview with CNBC’s Eunice Yoon.

Since launching about 10 years ago, Nio has focused on the premium segment of cars, priced around 300,000 yuan (about $41,500) or higher. The company has since expanded to Europe, but its monthly deliveries in China have generally remained modest versus competition.

Onvo’s L60 starts at 219,900 yuan ($30,439), versus the Model Y’s 249,900 yuan. Elon Musk’s electric SUV has been one of the best-selling pure battery-powered electric cars in China.

How Tesla may have just killed its most important product — Superchargers

Fierce competition in China’s electric car market has invited new entrants and prompted many companies to cut prices.

Smartphone company Xiaomi in late March entered the electric car market with its SU7 sedan to rival Tesla’s Model 3 with a price that was also about $4,000 cheaper.

The Model 3 has since cut its price by about $2,000 to 231,900 yuan, according to Tesla’s China website. Xiaomi said Wednesday it had delivered 10,000 SU7 vehicles.

BYD, which sold more cars than Elon Musk’s automaker last year when including hybrids, mostly sells cars in the range of 100,000 yuan or below. BYD has started to expand into higher-price segments in the last few years.

Nio CEO Li confirmed to CNBC the L60 is using lower-priced batteries from BYD.

Global competition from Chinese EV makers has also prompted stiff new tariffs from the Biden administration on imports of the vehicles to the U.S. Chinese EVs will be subject to a 100% tariff, the administration announced earlier this week.

When asked about the new levies, Li called them “completely unreasonable,” noting the impact on consumers and climate goals. That’s according to a CNBC translation of the Mandarin.

A ‘new standard’ family car to rival Tesla

Onvo aims to set a “new standard” for the family car, Alan Ai, president of the Nio sub-brand, said at Wednesday’s launch event in Mandarin, translated by CNBC.

The brand’s name stands for “On Voyage,” while its Chinese name “Le Dao” is meant to evoke a family having a happy time together.

Ai made many comparisons to the Model Y and other cars during his presentation.

He claimed the L60’s interior was more spacious than that of Tesla’s Model Y and Toyota’s Rav4. He also showed videos that claimed Onvo’s new car had better shock absorption and cut tighter figure-eights than those of competitors.

Onvo’s advertised driving range on a single charge is at least as far as — or even further — that of the Model Y depending on the version.

As a sub-brand, Onvo vehicles can access many of Nio’s battery swap and charging stations, Ai said.

He also showed videos of Onvo models using driver-assist technology to navigate through country roads and city streets.

Tesla’s driver assist software, Full Self Driving, isn’t available in China yet but is widely expected to be nearing Beijing’s approval for rollout.

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Business

People face 23-minute wait for HMRC helplines

Published

7 hours ago

May 15, 2024

Lora Jones

Taxpayers are facing 23-minute waits for HM Revenue and Customs helplines, according to a report.

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Business

BOE attends SID Display Week 2024, making waves with AI-powered display technologies and green practices By Investing.com

Published

9 hours ago

May 15, 2024

Investing.com

SAN JOSE, Calif., May 15, 2024 /PRNewswire/ — On May 14, SID Display Week 2024, a prestigious event hailed as the “Oscars” and barometer of the display industry, opened in San Jose, the United States. BOE, a global leader in the semiconductor display industry, presents over 50 trendsetting products empowered by its three display technology brands (ADS Pro, f-OLED, Î±-MLED), as well as cutting-edge technologies including glasses-free 3D display, light field display, AIoT, and VR/AR. Also, the display giant first laid out the concept and solution of “full-scenario AI smart display” at the world-renowned technology event. BOE’s showcase not only epitomizes its technology foresight and industry leadership but also demonstrates the global influence of China’s display industry. Notably, BOE set up a green and low-carbon zone in its booth, which is a testament to its leading role in the field of sustainability, particularly green manufacturing, green products and technology, and green supply chain. Guided by the strategy of “Empower IoT with Display”, BOE consistently pursues technological innovation and green development, leading the global display industry towards healthy, sustainable, and high-quality development.

Leading the way with three display technology brands

At SID Display Week 2024, BOE makes a big splash by debuting a slew of industry-leading display technologies and products empowered by its three display technology brands. Into the exhibition zone, visitors are welcomed by a gigantic 110-inch 16K glasses-free 3D display, the first of its kind in the world. The UHD display boasts ultra-high resolution, multiple viewpoints, wide color gamut coverage, and other features, pushing the boundaries of the display industry. Furthermore, the product adopts the Mini LED backlight technology with wide color gamut coverage and the self-developed 16K interleaved array algorithm that achieves a large viewing angle of 60 degrees. As such, the product is ideal for a broad range of scenarios such as advertising, meetings, and education.

BOE’s first ever electric flexible cockpit product draws a big crowd. The product comprises a 17-inch central display with a curvature gradient on the driver’s side and a new 15.05-inch electric foldable screen with a 400mm bend radius in the front passenger area, allowing users to change the form as needed. The globally launched 44.8-inch oxide smart cockpit is particularly eye-catching. Armed with the chip-on-glass (COG) MLED backlight technology, the product sports a million-level contrast ratio and a peak brightness of 2,000 nits, well satisfying consumer needs for premium image quality and an immersive viewing experience.

Additionally, BOE’s pioneering P0.3 Micro LED boasts a peak brightness of 2,000 nits, a contrast ratio of 40,000:1, and an astounding 110% coverage of the NTSC color gamut. The bezel-less curved slidable in-vehicle prototype adopts a modular spicing approach to achieve seamless splicing and flexible screen layout and content display. Equipped with the Mini LED backlight technology, BOE’s 16-inch Ultra-S laptop display designed for gamers features an unprecedented static contrast ratio of 2,000:1 and an ultra-high refresh rate of 240Hz. It offers an immensely smooth gaming experience with superb image quality akin to that of OLED display. With regard to frontier technology, BOE shows off its groundbreaking 32-inch light field monitor, which features a retina-grade resolution of 4K per eye. Its impressive face trace tracking feature and active human-machine interaction system deliver jaw-dropping immersive 3D display effects, holding the visitors in awe.

Full-scenario AI smart display to be the new catalyst

AI technology has become a vital catalyst for industrial upgrading. In embrace of AI, BOE pioneered “full-scenario AI smart display” to empower various scenarios such as AI-powered TV, PC, smartphone, automotive display, and AI XR. It is working with global partners to build a win-win AI ecosystem. At SID Display Week 2024, BOE presents an array of trailblazing AI-powered display technologies and products, injecting new vitality into the display industry.

The Gen 3 UB Cell AI TV boasts a staggering 95% coverage of BT.2020 color space, a reflectivity of only 0.7%, and a perceivable contrast ratio of 1,400:1 (more than twice that of OLED) in 100 lux ambient lighting. The TV produces no color deviation or fading from all viewing angles, offering a stunning viewing experience surpassing that of OLED TV. In terms of smart display, the first-of-its-kind integrated screen temperature sensor and multichannel light sensor can perceive the panel and ambient temperature, ambient brightness, and color temperature in real time on multiple dimensions, and the adaptive dynamic drive enables optimal image quality in any environment and scenario. The local dynamic refresh display technology for LCDs supports a smart refresh mode within the range of 1Hz to 120Hz across different zones, meeting the needs in innovative scenarios such as local display and smart frequency modulation. The screen’s power consumption declines by 15% to 50%. Plus, the product is equipped with BOE’s self-developed “AI TV digital assistant” voice interaction and control system based on its offline voice algorithms. The TV can serve as a smart speaker or a personal assistant when integrated with large language models and can be used together with other smart devices, thus acting as the brain of smart home.

Aside from innovative applications, BOE brings its “AI + display” image quality enhancement solutions, setting new trends for the display industry. In order to further reduce the power consumption of OLED display modules, BOE launched the first ever AI-assisted image quality enhancement technology for hardware-level power-efficient OLED display. Through deep integration of AI neural networks, OLED display modules can achieve real-time 8K 120Hz image processing and power consumption is reduced by over 20%, hitting the sweet spot between low power consumption and high image quality. Furthermore, BOE can also embed the industry’s first MLED image quality restoration technology into display chips, which supports free spicing. This technology has been used in COG MLED splicing display products.

Setting the pace through “technological innovation + green development”

BOE, a global leader in IoT innovation, is committed to both technological innovation and green development. At SID Display Week 2024, BOE set up a green and low-carbon zone showcasing its leading role in green manufacturing, green products and technology, and green supply chain. A variety of power-efficient and eco-friendly products like lap, monitor, and smartphone are exhibited, which embody BOE’s commitment to embedding green concepts in the processes of design, modules, panels, and end products.

BOE presents its world-beating 14-inch power-efficient laptop display backed by its industry-leading oxide technology. Using the Gen 10 oxide technology, the product leads the pack with 30% lower power consumption, and the panel consumes only 0.7W of energy at a refresh rate of 120Hz. BOE’s 23.8-inch Easy monitor armed with the feature integration technology saves display materials by 50%, and 30% of the glass it uses is recycled glass. Recycled materials are also used in BOE’s high-end 31.5-inch AB MNT LCD monitor with a high contrast ratio and low reflectivity and its 27.5-inch H monitor backed by the unique HSR dual-mode display technology, and the modules of both monitors have an impressive recycling rate of 53%, making them eco-friendly while guaranteeing optimal image quality. Additionally, BOE’s first ever OLED display with an independent pixel driving scheme adopts the world’s first SDP power-efficient OLED display technology, reducing power consumption by 5% to 6%. The product is suitable for multiple scenarios, setting a new trend in smart and low-carbon display.

In addition to showcasing its cutting-edge display technologies that enable smart interactions, BOE held a special technology marketing campaign at SID Display Week 2024. The event featured diverse use cases in auto, healthcare, camping, and other fields, as well as its “panel-device-system” integrated solutions. It was a manifestation of BOE’s strengths in setting new industry trends with innovative technology and its efforts to strengthen communication with customers and explore new areas of cooperation.

The year 2024 marks a starting point of BOE’s new journey in the next 30 years. Upholding the strategy of “Empower IoT with Display”, BOE will accelerate the convergence of display technology with IoT and digital technologies, continue to build the “Powered by BOE” innovation ecosystem, and lead the global display industry towards healthy, sustainable, and high-quality development, thus shaping a new future of smart living.

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