The MSCI All Country World index, a gauge of global equity performance, remains close to breaking new records, being only half a percent away from setting a new peak. Despite the persistent tensions around trade between the U.S. and China, including the ramifications of tariffs, analysts project a further 11% rise in this index over the next year. This strong position has led to a sense of optimism among investors, with some sitting on the sidelines waiting for a potential correction to invest their capital. Even if worldwide equity markets experience a downturn, there are extensive resources ready to be invested.
It’s worth noting that the old saying ‘sell in May and go away’ seems to lack relevance this year. The S&P 500 index, a measure of the large-cap U.S. market, has shown impressive performance in May, marking the best May returns in over three decades. Historically, June returns haven’t kept up with those of May, but an interesting pattern has emerged: whenever the S&P 500 has risen more than 5% in May, it has remained on the positive side for the next 12 months, each time, over the past six years.
On the other side of the Pacific, Taiwan Semiconductor Manufacturing, led by CEO C.C. Wei, announced its intent to continue its ambitious $100 billion investment plan for manufacturing operations in the U.S. Interestingly, this announcement comes amid the ongoing tariff questions. Wei admitted tariffs could have an effect, leading to price increases which could, in turn, reduce demand.
Despite the potential knock-on effects of tariffs, Wei pointed out that such impacts would mostly be shouldered by importers, rather than TSMC directly. Furthermore, the company finds reassurance in the robust demand for the high-end chips crucial for progressive AI research and applications. This resilient demand surpasses supply consistently, and provides some comfort for investors that growth in this high-tech sector can be sustained.
In more industry-specific news, sports-betting giants DraftKings and FanDuel recently suffered a setback due to new tax legislation passed in Illinois. The bill could result in the sports-betting industry paying an additional tens of millions in fees down the line. The stocks of these companies skidded on the announcement of this new tax regulation.
DraftKings and FanDuel hold prominent positions within the industry as they are the only two operators carrying out more than 20 million annual wagers in the state of Illinois alone. The fresh taxation scheme involves setting an initial applicable rate for the first 20 million bets, after which a higher rate is implemented. Estimates suggest this could effectively raise the current tax rate from 35% to more than half.
Shifting gears, tech bellwethers Hewlett Packard and Asana are prepping for their upcoming earnings announcements. Market watchers are predicting growth in adoption of artificial intelligence products, a field that was prioritized in their last quarter. This AI-adduced growth could be a crucial part of their upcoming earnings report for investors.
Alongside this, Asana is expected to showcase a rising revenue curve when its quarterly results are made public after the market shuts for the day. Similarly, CrowdStrike, another tech giant, plans to reveal their financial performance post-market. Notably, the company managed to cross the coveted billion-dollar revenue benchmark last quarter.
However, stakeholders have expressed concerns about possible additional costs arising from past legal disputes and the glitches that ensued. Their central focus is to discern whether the company can maintain the revenue trajectory north of the billion-dollar line, even under such circumstances.
CrowdStrike has carved a niche for itself in the cybersecurity landscape, mainly in endpoint security and managed detection and response. Nevertheless, the company remains aware that business never offers guarantees and the competition remains fierce. Adapting to the changing environment and staying abreast of emerging threats are pivotal to survival and growth in the volatile cybersecurity industry.
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