Here we are, on the cusp of the weekend yet again. I hope you have had an enjoyable and profitable week; if not, never mind – there is always next week! Anyway, let us enjoy the remaining time we have together and dive into this week’s News, Views and Truths.
It’s been a topsy turvy week in the markets. Monday was positive; Tuesday wasn’t. Wednesday saw a spike to the upside, whilst Thursday didn’t do much until a late sell-off. Overall, the FTSE 100 is up 0.11% for the week, the S&P 500 is up 0.24% and the Nikkei 225 is down 0.44%. Sideways trading is the theme of the week.
Yet positivity abounds. The US Dow Jones Industrial Average is around 2% away from going through 30,000, whilst the Nasdaq is less than 2% from 10,000 after hitting new highs on Wednesday’s bounce. But with that positive trend comes natural human caution and the fear that approaching certain numerical boundaries causes consternation.
That, frankly, is silly. Selling stocks simply because the index is approaching a round number is not based in any logical decision-making process and as all successful investors know, the stock market, over the longer term, increases in value. Albeit with occasional falls, which is the only thing that can be guaranteed.
The big concern at the moment is the Coronavirus; this week Apple warned of supply chain disruptions in China which sent the share value falling. However, every cloud has a silver lining. Central banks around the globe are already priming themselves for further stimulus injection in the event of a slowdown. And if the viral outbreak does recede, then the market could see a positive reaction to the upside.
Yet it’s important to not only look at equity markets. The bond markets have seen significant capital inflow during recent months, pushing yields lower and prices higher. This in itself does not point to irrational sentiment across equity markets, with investors continuing to hold sensible asset class diversification at the heart of their investment decisions.
As long as companies post decent gains in earnings & revenue and central bankers keep rates relatively low, the bull market may have more room to run. And remember maths. As the market climbs, each new 1,000-point barrier is actually a bit easier to top. For example, the Dow only has to go up 3.4% to get from 29,000 to 30,000. But the climb from 19,000 to 20,000 back in January 2017 required a 5.3% increase.
Anyway, I have not mentioned our favourite non-car-manufacturing-car-manufacturer yet; let me rectify this in the latest scheduled, “This Week in Tesla”.
This week can be filed under the technical term, “canny.” Opening the week down on the previous close at $785.90 per share, Alexander Potter, Tesla analyst at US Investment Bank Piper Sandler, boosted his price target on the stock to $928 from $729, becoming Wall Street’s most bullish.
As we have seen previously, Tesla fans need little in the way of positivity to boost the share price and immediately reacted to the upside, pushing the share price to $939 on Wednesday, a jump of 19.48% in less than 48 hours. As we speak, the price sits at $882.73 with some profit being taken, but that is still a 12.32% gain since Monday.
So, if you own Tesla shares, what should you do? Scottish Mortgage, the UK’s biggest equity investment Trust, who own around £950m Tesla shares, suggest you hold on. In fact, they have suggested that the shares could rise by “multiples” of their current value over the next five years.
Bottom line is, who knows? Tune in to the next scheduled episode of “This Week in Tesla” to find out.
And to finish, a playlist. Apparently, it’s going to be another wet and windy weekend, so take it steady and I shall see you all next week.