What happened last week
- AI Theme: NVIDIA (NVDA) rally to $3T in market capitalization vaults U.S. large caps to fresh all-time highs.
- Strong Payrolls Data: Nonfarm payrolls painted a picture of a strong labor market, surprising against the recent soft prints on other consumer-related metrics.
- European: Far-right gains and surprise French elections overshadowed the first European Central Bank cut since 2019.
What we’re watching this week
- Domestic Data: Inflation update, consumer sentiment; on the micro front, Apple’s annual developer event expected to unveil a new “AI iPhone.”
- Monetary Policy: FOMC policy meeting with economic projection and dot plot updates; the BOJ policy meeting is also important for levels of global yields.
- Geopolitics: Investor reaction to EU parliamentary elections, and a possible Israeli escalation with implications for global energy markets.
Horizon’s Investment Management Views
NVDA once again outperformed last week, driving slightly more than half of the total U.S. large-cap equity return over the past week and eclipsing, for a moment, the $3T market cap mark for the first time. NVDA CEO Jensen Huang doused the stock in jet fuel during his energized presentation at the annual “Computex” chipmaker conference in Taiwan. Today’s 10:1 stock split, which will likely re-engage some “priced out” retail investors and may drive additional option activity, also probably drove some strength. Domestic large-cap equity indices set fresh all-time highs last week on the strength of NVDA and other mega-caps.
Outside of the AI colossus that has driven more than 1/3rd of U.S. large-cap stocks’ YTD return, there were other things that happened last week (believe it or not). A stronger-than-expected jobs report surprised investors following a string of soft prints across consumers’ confidence and consumption behavior. Over the weekend, the strong showing from the far-right in European Parliamentary elections weighed on the Euro in early Monday trading and more than erased the gains from the “hawkish cut” delivered by the ECB last week. Calls for a snap election from the French President saw some French banks sell off roughly 10% and peripheral yields surge; we expect more European asset market volatility through the first election date at the end of this month.
Looking to the week ahead, May’s U.S. CPI release and the FOMC meeting both fall on Wednesday in what is likely to be a predominantly macro-driven week. While the Fed is not moving rates at this meeting, we will focus on guidance for 2024 cuts and Chairman Powell’s press conference. Outside the U.S., we will continue to monitor the fallout from the European elections and a meeting with the Bank of Japan. Geopolitics also remains in the news, with a particular focus on a potential escalation on Israel’s northern border and read-throughs to energy and inflation.
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