Risk-OFF Resumes

Issue 65;

• Oil, the dollar, and bond yields rise as stocks dip.
• The UK market suffers as Starmer faces a leadership challenge.
• The Gulf States and Utilities weaken.

The World Index maintains a bullish ByteTrend Score of 5 in USD. A correction began on Friday, making it a -0.3% week for global equities.

World Index – Developed Markets – Daily

Crude Oil Rallies

The oil price is rising again. This has lifted the dollar, the VIX, and bond yields. Risk-OFF has begun.

Dollar Index Rallies

The recent dollar weakness has coincided with market strength, meaning that last week’s dollar strength has halted the equity rally. The 1.4% rally matches the first week of March when the Iran War began.

Bond Yields

With the exception of China, yields are up across the board. The UK, Japan, and Europe saw new highs, with the USA close behind.

The VIX

Market implied volatility is rising again.

Global Equity Breadth – CAPR

Breadth continues to contract. The number of bull trends is falling while the number of bear trends is rising.

Industry Trend Changes in CAPR – Just Chips

The areas of strength last week were narrow, with Tech Hardware, Insurance, and Software seeing improved returns. Most other sectors were weak, notably Utilities.

Net Winners - Stay Long Energy, Materials, Financials

The winners-less-losers metric guides asset allocators. Commodities are the safe haven as the war in Iran likely escalates.

Breadth Changes by Country

No country saw an improvement in breadth last week. The US, China, Sweden, and the UK fared the worst. The market doesn’t like the direction of the UK political scene.

Europe is flagging while the US is once again the relative safe haven. The Gulf markets, which rallied in March, are now suffering.

Trend Type Performance

Despite all trend groups being lower last week, the divergence is widening. A new low from the Bear Trends would signal a bear market. It is notable that the bear stocks failed to make a new high in the April rally.

Regions and Industries Average Relative Score

This table (below) shows the average trend score, in CAPR (price relative terms), for each global industry, by region and in total.

At the top of the table, Metals & Mining fell further from its peak, and Banking & Lending’s reversal also accelerated. Environmental & Infrastructure and Advanced Industrials are the other groups fading from a strong position. In the middle of the table, Utilities had an especially bad week, as did Transport & Logistics, REITs, and Food & Beverage retailers.

At the bottom of the table, Software stocks are no longer the weakest group, as Home & Lifestyle (luxury) has fallen lower, while Software is showing some rare resilience. Manufacturing, Healthcare, and Retail stocks all remain weak. Overall, there was a significant relative decline across both strong and weak sectors. Only Tech Hardware, Energy, and Diversified Holdings (like CK Hutchinson or Mitsubishi) remain strong.

User Guide

Refer to our GTI: User Guide for an overview of the key concepts and terminology used in this report. These concepts may take a little bit of getting used to, but they are very powerful once you do.

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.

Nvidia

Nvidia is back to a trend score of 5, relative to the World Index. Despite being the world’s most famous winner, it had barely risen since mid-2024 in relative/CAPR terms, while other tech hardware stocks raced ahead of it. At a $5tn valuation, it’s hard to sustain the triple-digit annual returns, though the most extreme valuation multiples have moderated. CEO Jensen Huang joined President Trump on his trip to China, but it’s not clear what concessions were won. China is working hard to bring its domestic chip-making capabilities up to their level, but Nvidia still has the best chips on the market for now.

Prysmian

Copper cables were a boring business for much of history, but given the power demands of AI, it has become hot stuff. Prysmian is a European leader, innovative and financially strong, and has found itself well placed to service the world’s most exciting industry. Anyone with computer access can start an AI company, but building high-tech cable networks for international clients is a harder game to break into.

New Leading Trends

These stocks are trading at the 30-week CAPR highs with a ByteTrend Score of 5, except they are new trends this week, having previously had a score below 5. All charts shown are CAPR rebased to 100.

Palo Alto Networks

Cybersecurity company Palo Alto Networks is trying to catch up. The last few years have seen sales growth moderate from the mid-twenties to the mid-teens, yet its EV/Sales ratio remains at 20x. It is a buyer of memory, which the strongest-trending tech hardware stocks are selling, as the price is rising. After re-setting guidance last year, its fall accelerated, but it is catching up again as its role in AI-cybersecurity becomes clearer. Also, its ability to be a platform company selling a full suite solution rather than a vendor of many smaller products is strengthening its case. 

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.

United Health

Popular among quality investors, UNH is highly vertically integrated, giving it market dominance and incredible scale in the US healthcare and health insurance space. After the tragic murder of one of their executives, Brian Thompson, they’ve also had to deal with heavy regulatory concerns about their market position and certain practices, as they provide the insurance, care delivery, and pharmacies (through Optum).

Weakening

These stocks are trading at the 30-week CAPR lows with a ByteTrend Score above 0. They are weakening trends but not yet downtrends. All charts shown are CAPR rebased to 100.

Palantir

Controversial stock Palantir’s bull run ended last December. A month later, its CAPR trend score was down to a 2, and its downtrend had begun. It is now making repeated new lows relative to the index. It is clearly a phenomenal company because all the best companies are clients, but valuations got too extreme, and it’s paying the price.

Rolls-Royce

Is this market darling rolling over? The chart says to beware. Peak to trough, it rose 2,000%, but has now fallen to a score below three for the first time since 2022. We saw Rheinmetall suffering a similar fate last week – perhaps the European defence trend is over.

Bear Trends

These stocks are trading at the 30-week CAPR lows with a ByteTrend Score of 0. They are in a downtrend. All charts shown are CAPR rebased to 100.

Tencent

Chinese tech is a mixed bag. Some are soaring, others not. Tencent is in the second category, as it is being left behind in the AI rally, with its investments holding margins back and the growth uplift not yet clear. Nonetheless, it remains a diversified internet platform with WeChat, gaming, cloud, and fintech exposure, steady growth, and strong free cash flow generation.

American Express

This favourite of Warren Buffett is under pressure, amid fears that AI could direct customers and sellers towards cheaper payment solutions. It has a rich valuation, and although results have remained strong, there hasn’t been enough to sustain investor excitement (guidance upgrade not big enough).

National Grid

National Grid was one of three UK utilities to fall from a CAPR score of 3 to 0 last week, alongside SSE and Severn Trent. All three are down around 10% in May. The US utilities index is down 6% in the last 10 days, including 2.3% on Friday alone. This traditionally defensive sector has been implicated in the AI rally, casting doubt on its safe-haven status (regulated profits uncorrelated with the economic cycle). NG has a huge capital investment program underway. Before getting to data centres, the UK and US national grids are in dire need of upgrading, which is costly work.

GTI 200 Spreadsheet

We are pleased to share the GTI 200 spreadsheet. Download the spreadsheet below to view the CAPR and local currency scores, and more, for the world’s largest 200 stocks. Have a look at the different groups and the main list “All stocks”. The Insights tab is interesting, and don’t forget to expand the columns by clicking on the “+” at the top of the page if you want to see more trend data.

Outlook

The stockmarket has been heated, mainly via the technology hardware sector. Higher energy prices have led to inflation, which is sinking the bond market. The longer this continues, the worse it will become. 

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