Germany Gives it Back

Issue 37;

• The stockmarket recovers from another week of turbulence.
• Germany stocks give back much of their gains.
• Consumer stocks wake up from the dead.

The World Index dropped to a ByteTrend Score of 3 on Friday, 10^th October, China tariff day, but subsequently rebounded to a 5.

World Index – Developed Markets – Daily

This is remarkable given that the VIX Index of implied market volatility touched 29% on Friday, 17^th October. But perhaps the panic wasn’t large enough to make a real difference.

VIX Index

Still, the high volatility stocks are 9% off from their all-time high on Wednesday, while the low volatility stocks are off by less than 1%. The spread has run hard, and we know from experience what the next chapter looks like. It can’t be too far off from now.

High Versus Low Volatility Stocks

Remarkably, the global equity breadth has not been impacted as might be expected. The red bear trends are slightly higher, while the blue bull trends are slightly lower.

ByteTrend: Weekly Breadth Signal – Local Currency

In sectors, real estate and defensives rallied for the first time in a while. Utilities also recovered, along with communications. Financial services slumped, along with industrials and energy.

Global Sectors in CAPR

In Q4 2024, the USA rallied, leaving the world behind. That pre-election move is starting to be washed out in the 12-month rolling data. Over the past year, there is a divergence, which is in part due to the weakening trend in the US dollar since January. It is interesting how the non-US major markets have arrived in the same place. That is, except for Germany, which led the way earlier this year and is now giving it back.

CAPR: Europe, USA, Emerging Markets, and Japan - Past Year

The world matrix still sees financials and utilities as the strongest sectors, but financials have been weakening in all regions. Real estate has picked up, especially in the USA.

Average ByteTrend Score by Region and Sector Heatmap – CAPR

Leading Trends with New Highs

These stocks are trading at the 30-week CAPR highs with a ByteTrend Score of 5. All charts shown are CAPR rebased to 100.

American Express

A Buffett stock is back to a 5. It’s up 8% in price terms this week as results beat expectations, with record revenue growth (+11% YoY) driven by strong momentum in retail and travel. US retail spending was strong, up 9%, and premium airline seating (“front of cabin”) was up 14%. What crisis? 

EssilorLuxottica

With LVMH’s results last week and this morning’s news from Kering, the luxury sector is getting its act together after a few difficult years. Pricing power went too far during the pandemic and pushed consumers away after an initial honeymoon period. EL also enjoyed broad-based growth, leading to a 12% group uplift, including stronger results from its key market, China. Wearables (tech glasses) were a large contributor to that growth. That is what investors are focused on.

Southern Copper Corp

SCCO will report on Friday this week, with the share price at an all-time high. Oil is weak, but gold is strong, as copper is being pulled in both directions. Net debt is falling, and ROIC has remained high and consistent despite the cyclical nature of its business. SCCO is a smart operator, focusing on cost control and a prudent capital structure to maintain profitability through the cycle.

Newmont Corp

It took time for the gold miners to outperform, but with the oil price crashing (their largest cost) and the gold price soaring, there has not been a more favourable setup for miner profitability in many years, if ever. Newmont lost its CEO recently, but has marched higher regardless.

There are 63 additional leading trends with new highs in the GTI universe. Tech, gold, and engineering dominate the list. A few Indian stocks have reappeared following a retreat. Luxury goods also feature, as does coal. The list of financial stocks has retreated significantly.

Emerging Trends

These stocks are trading at the 30-week CAPR highs with a ByteTrend Score of less than 5. They don’t have to be in an uptrend, just emerging. All charts shown are CAPR rebased to 100.

With such a short list and given how much we have written about Intel and Samsung, we show two new emerging trends from the wider list.