🧰 Markets Focus – Central Banks, Nike and Debt

The equity market continued its second day of solid performance as the investors took comfort from the Chinese central bank’s pumping of further cash into the equity market. In particular, we saw the S&P 500 climb above 3% from its week’s low, and a broad-based category of stocks moved north.

The index has now recovered above its 50-day moving average, which is a critical technical level investors have been eyeing. Essentially, market participants appeared to have digested the reality of Evergrande possible collapse and that the contagion risk might be contained in some forms.

Pika World continues to maintain weightage on the previous stockholding, including financials, defensive counters as a portion for hedge coupled with growth sectors in small-cap as part of the mid-cycle transition period as we had laid out in our numerous prior writings.

🏀Nike: Victim of Supply Chain Constraint

Shares of the sports apparel giant fell despite beating the forecast on profit but being short on sales. This is attributed mainly to the shortage of inventory as demand for sports products remains strong. Unfortunately, the company is not seeing this issue disappearing anytime soon.

While this is not uncommon given the Covid situation, investors are uncertain about the impact for the coming quarters.

🤼The Debt Ceiling Fight

As the FOMC meeting ends, we shift our spotlight to the fight on debt ceiling suspension. Political risks are mounting once again as the prospect of a credit default, unimaginable in the US, grows.

The intraparty fight between the Democrats and Republicans risk a possible government shutdown and derail the infrastructure spending plan that is already a tough nut to crack. Republicans have stated their stand: they will not vote to suspend or lift the debt ceiling and roll over the court to the Democrats to scramble towards a plan to ensure the US continue to honour its financial obligation.

To give a hint of the potential impact, there was an episode of government shutdown between the end of 2018 into 2019. Leading up 35 days into the deadline, the S&P 500 tumbled around 11% but swiftly when the shutdown ended.

While the odds of a US default seem remote, Pika World continues to monitor the economy’s politics closely.

🚘Cathie Wood & Tesla

Here comes the hotcake of Pika World. Cathie Wood, a famous technology investor, stated that she is willing to sell her stake in Tesla if the stock hit her price target of $3000 early. This comes as she spoke at Morningstar Investor Conference virtually on Wednesday.

She has often defied many bears call who often shout on the high valuation as a bubble forming. Yet, her fund believes that there are numerous platform opportunities in the market and that their rapid growth rates are sustainable. In addition, the fund is committed to identifying the right mix of investment, especially in artificial intelligence, which can assist Tesla towards self-driving cars.

📮What’s on the Menu Today?

At 10 pm, we will have Uncle Powell speaking, and FOMC member Bowan will also be speaking at the same time.

Concurrently, we will have the result of New Home Sales for August, which we expect a modest climb to 714K from 708K in the prior period.

It is 24 September, Friday, at 7.30 am in Singapore and 7.30 pm in New York. We have arrived at the week’s last trading day, and Pika World wishes all a profitable investing and trading week!