Market Quote: Global Equity Markets Stay Volatile, Consumer Discretionary Stocks Do Too
Author: The editor's desk
August 8, 2024
A mid-week analysis of what’s happening in global financial markets from the perspective of AGF’s investment management team.
Stand Corrected
Global equity markets remain volatile after being rocked earlier in the week because of growing concerns about the durability of U.S. economic growth and mounting scepticism towards artificial intelligence-related demand.
We believe this is not a market crash, but a normal correction that may soon run its course if the U.S. Federal Reserve (Fed) cuts rates and Purchasing Manager Indices (PMIs), which currently reflect slowing manufacturing activity, end up bottoming from here.
With Discretion
The global Consumer Discretionary sector has lagged the broader global equity market so far this year, and its relative performance has remained volatile over the past month driven by industry rotations and mean-reversion trades.
Recent weakness from the latest non-farm U.S. payroll numbers and volatility in the global stock market has accentuated the risk of a recession, and many discretionary companies are seeing their consumers become more value focused regardless of income levels, while they also cut back on non-essential purchases.
Geopolitical exposure to import tariffs has also become a common point of discussion within certain industries. Nonetheless, with the diversity of the global consumer discretionary sector across its 10 industries and 27 sub-industries, there are still areas where tailwinds should be stronger than headwinds. For example, rate-sensitive industries in the U.S. may continue to benefit from strong housing resale values and the imminent start of a rate-cut cycle by the Fed.
We believe stock selection will remain an important tool for outperformance in Consumer Discretionary names with stocks operating in the same industry or competing in the same categories potentially generating vastly different returns based on brand strength, value perception and management execution.
Laboured Response
It’s doubtful whether Tim Walz, Kamala Harris’ running mate, will affect the U.S. election. Vice presidential candidates rarely make much of a difference. Harris had a decent chance of capturing the White House three weeks ago, and she still does.
We’re content to wait until after Labour Day before making an election call. Harris probably hasn’t hurt herself but with two outspoken progressives running on the same ticket, they have given Trump an opening.
For full bios, please visit our contributor’s page.
The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds, or investment strategies.
Commentary and data sourced from Bloomberg, Reuters and other news sources unless otherwise noted. The commentaries contained herein are provided as a general source of information based on information available as of August 7, 2024. It is not intended to address the needs, circumstances, and objectives of any specific investor. The content of this commentary is not to be used or construed as investment advice, as an offer to buy or sell any securities, and is not intended to suggest taking or refraining from any course of action. Every effort has been made to ensure accuracy in these commentaries at the time of publication, however, accuracy cannot be guaranteed. Market conditions may change and AGF Investments Inc. accepts no responsibility for individual investment decisions arising from the use or reliance on the information contained herein.
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About AGF Management Limited
Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. Our companies deliver excellence in investing in the public and private markets through three business lines: AGF Investments, AGF Capital Partners and AGF Private Wealth.
AGF brings a disciplined approach, focused on incorporating sound, responsible and sustainable corporate practices. The firm’s collective investment expertise, driven by its fundamental, quantitative and private investing capabilities, extends globally to a wide range of clients, from financial advisors and their clients to high-net worth and institutional investors including pension plans, corporate plans, sovereign wealth funds, endowments and foundations.
Headquartered in Toronto, Canada, AGF has investment operations and client servicing teams on the ground in North America and Europe. AGF serves more than 800,000 investors. AGF trades on the Toronto Stock Exchange under the symbol AGF.B.
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