Will the optimism dissipate or will the rally gain new fuel?
This week, the stock market rally of the previous weeks will be subjected to a baptism of fire as the major market forces – tech giants, central banks and economic growth – reveal their hand simultaneously.
MAG7 earnings
The price increase in recent weeks has largely been based on expectations, but this week it's time for the numbers. Wednesday, April 29 and Thursday, April 30 are the most important days in the calendar, when almost all MAG7 companies will report their results.
Microsoft, Alphabet, Meta, and Amazon will publish their results on Wednesday, April 29 after the market closes. Investors may no longer be satisfied with talk about artificial intelligence, but will be more interested in whether AI investments are showing up below the line –in areas such as Microsoft's Azure and Google's cloud services. In Meta’s case, the focus will be on the impact of new algorithms on advertising revenue and profitability.
Apple will release its results on Thursday, April 30, after the market closes. For Apple, it's a defensive battle. The market will be looking to see how iPhone sales will hold up amid global uncertainty and whether the company will finally reveal moreabout its own AI strategy.
The earnings reactions of these MAG7 companies can change the direction of the entire stock market, regardless of the macroeconomic news.
Related Products
MICROSOFT, 5 year chart
MICROSOFT, 1 year chart
Related Products
GOOG, 5 year chart
GOOG, 1 year chart
Related Products
META, 5 year chart
META, 1 year chart
Related Products
AMAZON, 5 year chart
AMAZON, 1 year chart
Related Products
APPLE, 5 year chart
APPLE, 1 year chart
Central bank decisions
Interest rate decisions from the US and Europe will also be released during the week. Market volatility may increase significantly around the time of these announcements.
The US Federal Reserve (Fed) will announce its interest rate decision on Wednesday, April 29. Several MAG7 companies will also release their earnings reports on the same day. Itis expected that the Fed will keep interest rates unchanged at 3.50% - 3.75%. However, what is most important areChairman Jerome Powell's comments: How will the recent rise in energy prices affect the inflation outlook, and will the Fed have to postpone interest rate cuts even further?
The European Central Bank (ECB) will announce its interest rate decision on Thursday, April 30. Growth in the Eurozone has been significantly stickier than in the US, creating strong pressure for interest rate cuts. At the same time, however, high inflation and uncertain geopolitical conditions limit the central bank's room for maneuver.
GDP figures: US engine vs. Europe's cough
While central banks consider interest rates, fresh preliminary data on economic growth (Q1)emerges. The figures highlights the divergence between the US and Europe (N.B.: please insert source):
The expectation is positive (GDP Growth Rate QoQ Adv, expected 2.2%). Strong growth may delay interest rate cuts due to fear of inflation.
In contrast, Europe is clearly expected to see lower growth (GDP Growth Rate QoQ Flash, expected 0.2%). Weak growth could prompt the ECB to consider faster stimulus.
A bubble of optimism or sustainable growth?
The market is currently loaded with positive expectations. If MAG7 companies beat forecasts and central banks offer even a small glimmer of hope for interest rate cuts, the rally could gain new fuel.
However, the risk is obvious: if companies' results signal that the AI hype is waning or if macro data surprises negatively, there are elements of a drastic correction in the air.
Indicators shown on the graphs:
● SMA200: 200-day moving average, red.
● SMA50: 50-day moving average, blue.
● EMA25: 25-day exponential moving average, yellow
Risks
Credit risk of the issuer:
Investors in the products are exposed to the risk that the Issuer or the Guarantor may not be able to meet its obligations under the products. A total loss of the invested capital is possible. The products are not subject to any deposit protection.
Currency risk:
If the product currency differs from the currency of the underlying asset, the value of a product will also depend on the exchange rate between the respective currencies. As a result, the value of a product can fluctuate significantly.
Market risk:
The value of the products can fall significantly below the purchase price due to changes in market factors, especially if the value of the underlying asset falls. The products are not capital-protected
Product costs:
Product and possible financing costs reduce the value of the products.
Risk with leverage products:
Due to the leverage effect, there is an increased risk of loss (risk of total loss) with leverage products, e.g. Bull & Bear Certificates, Warrants and Mini Futures.
External author:
This information is in the sole responsibility of the guest author and does not necessarily represent the opinion of Bank Vontobel Europe AG or any other company of the Vontobel Group. This information is sponsored by Bank Vontobel Europe AG, which may be a counterparty to transactions involving the financial instruments discussed in this information. The further development of the index or a company as well as its share price depends on a large number of company-, group- and sector-specific as well as economic factors. When forming his investment decision, each investor must take into account the risk of price losses. Please note that investing in these products will not generate ongoing income.
The products are not capital protected, in the worst case a total loss of the invested capital is possible. In the event of insolvency of the issuer and the guarantor, the investor bears the risk of a total loss of his investment. In any case, investors should note that past performance and / or analysts' opinions are no adequate indicator of future performance. The performance of the underlyings depends on a variety of economic, entrepreneurial and political factors that should be taken into account in the formation of a market expectation.
Disclaimer:
This information is neither an investment advice nor an investment or investment strategy recommendation, but advertisement. The complete information on the products (securities) mentioned herein, in particular the structure and risks associated with an investment, are described in the base prospectus, together with any supplements, as well as the final terms relating to the securities. The base prospectus and final terms constitute the solely binding sales documents for the products mentioned herein. It is recommended that potential investors read these documents before making any investment decision. The documents and the key information document are published on the website of the issuer, Vontobel Financial Products GmbH, Bockenheimer Landstrasse 24, 60323 Frankfurt am Main, Germany, on https://prospectus.vontobel.com and are available from the issuer free of charge. The approval of the prospectus should not be understood as an endorsement of the securities. The securities are products that are not simple and may be difficult to understand. This information includes or relates to figures of past performance. Past performance is not a reliable indicator of future performance. This information may only be distributed or published in countries where such distribution or publication is permitted by applicable law. As stated in the relevant base prospectus, the distribution of the securities mentioned in this information is subject to restrictions in certain jurisdictions. This advertisement may not be reproduced or redistributed without prior permission by Vontobel.
© Bank Vontobel Europe AG and / or affiliated companies. All rights reserved.