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Navigating the Volatile Equity Landscape: Uncovering Promising Opportunities

2024-10-31

The equity markets have experienced a rollercoaster ride this year, with investors remaining bullish on Big Tech while also scooping up shares in lesser-known companies. However, ongoing political tensions and macroeconomic uncertainty have raised questions about which sectors and stocks will outperform in the coming months. CNBC Pro sought insights from Kevin Teng, CEO of Wrise Private Singapore, on the stocks he favored at the start of the year and the names he's betting on before the year's end.

Uncovering Promising Opportunities Amidst the Volatility

Exxon Mobil and Barrick Gold: Navigating the Commodity Landscape

Teng, whose firm serves ultra-high-net-worth individuals across Asia, the Middle East, and Europe, identified oil and gas giant Exxon Mobil and Canadian miner Barrick Gold as two of his top picks at the start of the year. Despite the recent market fluctuations, he still maintains a positive outlook on both stocks. Year-to-date, Exxon's shares have gained 16.7%, while Barrick Gold and Microsoft have seen gains of around 10.8% and 15%, respectively.Teng continues to view Exxon as a "promising opportunity," but he advises investors to "seek more favorable entry points going forward," as the stock has been on the decline over the last few weeks. Regarding Barrick Gold, Teng believes the stock "remains one of the top stocks to play the ongoing gold rally," though he suggests that investors should "consider trimming their positions and [take] profits" given the current market consensus on the positioning of gold.

Microsoft: Capitalizing on the Rise of Generative AI

Teng remains bullish on Microsoft, despite Wrise making a "partial switch" and reducing its weight in the tech giant while increasing allocations to Nvidia in early August. Microsoft is part of the so-called "Magnificent Seven" stocks, which also include Alphabet, Amazon, Apple, Meta Platforms, and Tesla."We recognized [Microsoft's] relative underperformance compared to the Magnificent Seven and made the partial switch to take advantage of the pullback," Teng explained. However, he is now betting on Microsoft, given its "strong monopoly in PC operating systems and productivity software." Teng also believes the company is "well-positioned to capitalize on rising demand for generative AI through its existing partnership with OpenAI."Microsoft's recent fiscal first-quarter results surpassed Wall Street's expectations, with earnings per share coming in at $3.30 compared to the $3.10 expected, and revenue hitting $65.59 billion, versus the anticipated $64.51 billion. While the tech giant has provided revenue guidance of $68.1 billion to $69.1 billion for the current quarter, which is below the $69.83 billion that analysts were expecting, most analysts remain upbeat on the stock, with 53 out of 58 analysts covering it having a buy or overweight rating at an average target price of $496.66, according to FactSet data.

Nike: Navigating Bearish Sentiments and Seeking Long-Term Growth

Another stock that Teng favors is athletic footwear and apparel label Nike, despite the bearish sentiments on Wall Street. Nike recently announced its expectations of an 8% to 10% drop in revenue in its current quarter, which is worse than the 6.9% decline analysts expected. Shares in Nike have been on the decline, falling almost 30% since the start of the year."At present, Nike looks a bit oversold due to bearish sentiments," Teng acknowledged. However, he describes it as an "attractive investment opportunity," thanks to its "leading market position, robust brand equity and strategic initiatives aimed at long-term growth." Data from consulting firm AlixPartners' Consumer Sentiment Index shows Nike as the top active footwear retailer among respondents across age groups.Out of 37 analysts covering the stock, 18 give it a buy or overweight rating, 17 have a hold rating, while two have a sell call, according to FactSet data. The analysts have an average price target of $90.62 for the stock, giving it 18.5% upside potential.

Walt Disney: Capitalizing on Streaming and Cost-Cutting Initiatives

Teng's list of top stocks also includes Walt Disney, the home of Mickey Mouse and the company behind brands like streaming platform Disney Plus and movie producer Marvel Studios. The wealth manager believes the stock "appears attractive at current valuations due to its cost-cutting plans and its focus on its streaming services.""With popular content among consumers, Disney Plus' subscriber base has grown quickly and its streaming profit should ramp up into 4Q and 2025," Teng added. Disney's Pixar Animation Studios laid off 14% of its headcount earlier this year in a bid to cut costs, and the company's other businesses commenced layoffs last year as it prioritizes the quality over the quantity of its content.Shares in Disney are up 5.3% year to date, and 23 of the 33 analysts covering the stock give it a buy or overweight rating at an average price of $110.20, according to FactSet data, which gives it 15.9% upside potential.

Investors who have been hedging against a deeper selloff in US Treasuries are preparing for increased volatility as the release of the highly anticipated US employment report on Friday and the upcoming Federal Reserve policy decision next week offer crucial insights into the direction of the bond market.

Bracing for Turbulence: Investors Gear Up for a Pivotal Week in the Bond Market

Anticipating the Impact of Economic Data and the Fed's Next Move

US bonds remained relatively unchanged in early Asian trading on Friday, following a dismal October performance that saw the worst monthly results in two years. With the looming election and the Fed meeting just days away, a measure of daily yield swings has reached its highest point in a year as traders position themselves for further losses. This could potentially send 10-year yields as high as 4.5% over the next three weeks, compared to the current level of around 4.3%.This positioning makes the evidence of a robust US labor market in the government data released on Friday a crucial factor that the market cannot ignore, according to Jack McIntyre, portfolio manager at Brandywine Global Investment Management. While weak data could be attributed to the impact of strikes and storms, a strong jobs report would remove pressure on policymakers as they consider lowering interest rates.

The Fed's Balancing Act: Navigating Expectations and Policy Decisions

McIntyre believes the Federal Reserve is unlikely to surprise the markets too much, and he expects a quarter-point rate cut at next week's meeting, in line with the consensus among most economists surveyed by Bloomberg. However, he anticipates the Fed will send a hawkish message and signal that they are done cutting rates for a while.The selloff in Treasuries over the past month, with yields rising by roughly 60 basis points, has been sparked in part by an unexpectedly strong reading of September's job data. Since then, volatility has increased in anticipation of the upcoming presidential debate and the uncertainty surrounding the Fed's policy path.

Volatility Spikes as Traders Brace for Turbulence

The ICE BofA Move Index, a closely watched gauge of US bond-market volatility, closed at its highest level this year this week, indicating that traders are willing to pay a premium to protect against increased turbulence. A notable flow on Thursday included a long volatility play for a premium of $10 million via options linked to the Secured Overnight Financing Rate.Traders are currently pricing in about a 90% chance that the Fed will cut rates by a quarter point next week, which is smaller than the half-point reduction in September. Swap rates anticipate a total of about 117 basis points of easing over the next 12 months, about 67 basis points less than at the beginning of October.

Shifting Positions and Expectations in the Bond Market

The unwinding of positions has been reflected in the cash market, where the latest survey from JPMorgan Chase & Co. shows clients reducing both long and short positions, with neutrals on the rise.In the options market, traders have been positioning for a further selloff. Thursday's flows included a $6.5 million premium bet on a 4.4% 10-year yield by November 22, while the most-populated option put strike targets a rise to 4.5%.While the October jobs report is unlikely to alter expectations for the November Fed decision, the data could still "move market expectations for the path of rate cuts during future meetings," said Greg Wilensky, head of US fixed income at Janus Henderson Investors. Traders will pay close attention to the unemployment rate, which economists forecast will remain steady at 4.1%. Strong data has the power to bolster bond-market expectations for a potential pause in interest-rate cuts early next year.

The Fed's Balancing Act: Lowering Rates and Signaling Future Policy

While the Fed will likely lower rates next week, "shifting to a quarterly pace of 25 basis point cuts by skipping January remains the path of least resistance and is consistent with our expectations – as well as a relatively consensus take at the moment," according to Ian Lyngen, head of US rates strategy at BMO Capital Markets.As investors navigate the turbulent bond market, they must carefully weigh the impact of economic data, the Fed's policy decisions, and the broader market sentiment. With volatility on the rise and the potential for significant shifts in yields, investors must remain vigilant and prepared for the challenges and opportunities that lie ahead.

In the world of collegiate swimming, where dreams are pursued with unwavering dedication, Fitter and Faster Swim Camps proudly celebrates the achievements of Luke Eskola, a talented athlete from Hillsboro, Oregon, who has committed to the University of Denver. This announcement marks a significant milestone in Eskola's journey, as he prepares to embark on a new chapter in his swimming career.

Empowering the Next Generation of Aquatic Champions

A Promising Future at the University of Denver

Luke Eskola, a current senior at Liberty High School, has made the decision to continue his academic and athletic pursuits at the University of Denver. This prestigious institution has a rich history of producing exceptional swimmers, and Eskola is eager to be a part of this legacy. "The team and coaches at the University of Denver made me feel like I was truly wanted and valued," Eskola shared. "The swimmers are so excited about the future of the program, and I can't wait to be a part of that."Eskola's impressive performance at the recent Oregon Region XII SC Championships, where he set a new personal best in the 200 breaststroke and placed sixth in the 200 IM, has only further solidified his potential. His continued success at the 2024 Futures Championships in Sacramento, where he lowered several of his personal bests and made two final appearances, has only added to the excitement surrounding his future at the University of Denver.

Carrying the Torch of Hillsboro Heat's Legacy

Eskola's commitment to the University of Denver also holds a special significance, as he will be following in the footsteps of Hillsboro Heat alum Anton Loncar, who was the 2018 Summit League male swimmer of the year. Loncar's remarkable achievements, including breaking and holding Denver's school records in the 200 back and 100 back, as well as his impressive performances at the NCAA Championships, have set a high bar for Eskola to aspire to."This connection means a lot to me, knowing that while at DU, I will be supported in my swimming and education, and that the sky's the limit!" Eskola expressed, eager to continue the legacy of success that Hillsboro Heat has established.

Joining a Powerhouse Program

The University of Denver is a Division I Mid-Major school that competes in the Summit League, a conference that has seen the Pioneers dominate in recent years. In 2024, the team won their 10th conference championship in the last 11 years, showcasing their consistent excellence.Eskola's arrival on the Denver roster will bolster an already impressive lineup. The Pioneers' depth chart indicates that Eskola would have ranked 10th in the 200 IM and 6th in the 400 IM, demonstrating his potential to contribute significantly to the team's success. With the departure of two of Denver's top IMers, Eskola's addition will provide a valuable opportunity for him to make an immediate impact.

A Diverse and Talented Incoming Class

Eskola will not be the only new face on the Denver roster next fall. He will be joined by a diverse and talented group of incoming athletes, including Utah's Gabe Jones, Texas' Kurt Owens, and two Colorado natives, Pierce Bickerton and Bayden Todd. This influx of new talent promises to elevate the Pioneers' program to even greater heights, as they continue to attract top-tier swimmers from across the country.As Eskola embarks on this exciting new chapter, he can take comfort in the knowledge that he will be surrounded by a supportive team and coaching staff, all of whom are dedicated to helping him reach his full potential. With his unwavering determination and the resources of the University of Denver at his disposal, the future looks bright for this rising star from Hillsboro.