Here's what you need to know
With global stock markets pretty much flat over the past four weeks, you’d be forgiven for thinking it’s been a quiet end to the summer for financial markets. However, things haven’t been as quiet as they might seem. Some indices, particularly those with heavy weightings towards big tech companies, such as the Nasdaq in the US, soared towards the end of August, followed up by a sharp pullback at the beginning of September, as some people started to question the lofty valuations on certain high-growth stocks (we’re looking at you, Tesla).
Shares in the electric vehicle manufacturer (named after renowned electrical engineer Nikola Tesla) experienced a 50% rally in late August followed by a 30% decline in early September. And whilst shares in Tesla have begun to strengthen again more recently, the same can’t be said for those in the electric truck business, Nikola, founded 11 years after Tesla. The allegations aimed at the business, which included claims that they rolled a truck down a hill in a promo video to conceal the fact that it had no working engine, were almost as shocking as the total lack of imagination in the company’s name… The short report was released just two days after General Motors announced a $2bn deal with the company.
Other big news included Apple becoming the first company with a two trillion dollar market cap, luxury conglomerate LVMH deciding that perhaps diamonds aren’t forever as they sought a way out of their agreement to buy US jeweller Tiffany & Co., and several US companies including Walmart battling to acquire the American operations of TikTok, with software giant Oracle emerging victorious as it reached an agreement with the app’s owner ByteDance.
Elsewhere, the US Federal Reserve met towards the end of August and made a significant change in its approach to managing inflation. The central bank, which previously had a hard target of 2%, will now target an average rate of inflation of 2%. Whilst this might not seem all that different, it may allow the Federal Reserve to keep interest rates lower for longer due to the fact that inflation has spent a number of years below 2%.
Looking ahead, financial markets continue to have one eye on Covid-19 developments, with signs in some areas of the world that cases are on the rise again. October will see third quarter earnings season and the latest commentary from companies around the globe on how their businesses are performing through the ongoing pandemic. And in November, Donald Trump and Joe Biden are set to go head-to-head in the US Presidential election, with the latter currently ahead in the polls and promising to implement his Build Back Better environmental plan.
Please note this article is for information purposes only and is not personal advice. As is the nature of investing, your capital is at risk.