⏰Second Half Begins🧸

As we flip to the next page of our equity market chapter, the 1H has been a roller coaster and disastrous year for the equity market. Namely, the S&P 500 registered its worst first half since 1970. 

As investor sentiments remain sour, market analysts expect the S&P 500 to fall further. After all, a bear market has an average duration of 10 months from its peak and lowers by an average of 34%. If we follow this trend, then October might be the light at the end of the tunnel. 

Pika World believes an end would arrive (obviously lol), and when it does come, it tends to be violent. Equity markets rally violently when investors are the gloomiest creatures on Earth. So let’s watch out for that. 

🛎Corporate Earnings Recession🗝

We should be ushering in the next earning season soon. Pika World believes a further decline in stock prices could largely be attributed to the poorer earnings report, especially when corporations announce their forecast or review a deterioration in their margin. It might be a corporate earnings recession. 

After all, yesterday’s data further reinforce consumers’ lack of appetite for massive spending, although it does help to tame inflation. In such an environment, any positive news on inflation (often related to a fall in demand) is terrible news for the general economy (companies will perform poorer) and leads to a sell-off, no matter the nature of the news. 

Hence, Pika World will be more cautious about massive accumulation. 

📉Share prices of car stocks are hammered🍄

A review of the current trend shows that the automotive sector fares badly for the April-June quarter. Car stocks performed poorly as Ford (F) and General Motors (GM) fell 34% and 27%, respectively. Tesla, Pika World’s favourite, tumbled by 38%. 

The rise in interest rate posed two may cause problems for car stocks. First, it tends to depress valuation as we know about it. Most cars are purchased with financing, and this dents affordability for vehicle purchases, reducing appetite for a car. 

Next, inflation kills the profit margin for car makers through higher costs on auto parts. EV makers tend to hit harder than the traditional car markets. Nonetheless, on the flip side, we see Chinese car markets such as NIO, LI and XPENG all rising for the quarter. Yet their rise is also offset by a dark first quarter where their stock prices had declined rapidly. 

Investors should be able to get the latest data appoints on June delivery figures for the Chinese vehicles at a time when China is easing restrictions and hopefully a bounce back in demand. 

If we recall, the trio delivered around 18,000 cars in April and 29,000 in May. A hit of 35,000 for June should ease investors’ concern. 

The market remains in a sea of turbulence, and Pika World remains cautious on big trades.