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Or Patreanu Portfolio : The S&P500 closed above 5,000 points for the first time: the main reason for the swing of the indices in the US is provided by a group of 7 large technology stocks that have been nicknamed the “Magnificent 7”. The Japanese Nikkei index, which jumped 10.3% since the beginning of the year, is approaching its historical peak from 1989. The Tel Aviv market will respond this week for the reduction of the country’s credit rating by Moody’s agency published on Friday

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A festive and optimistic weekend passed for Wall Street investors. At the end, after registering a weekly increase of 1.4%, the S&P500 index stopped at a new record that also came with a new prefix – 5,026 points. It is also the first time that the main barometer of the US stock market closes the trading day above 5,000 points. Or Patreanu Portfolio

Last week’s increase provided several more landmarks for the American index, which had already managed to rise since the beginning of the year by 5.4%. The index that first broke through the 4,000 point limit in April ’21 completed a fifth consecutive week of gains. He also completed a positive week number 14 in the last 15 weeks. His only negative week was recorded at the beginning of January this year.

The main momentum of the old index is provided by the 7 stocks of the major technology companies, also known as the “Magnificent 7”. 6 of the 7 are now traded – each one – with a value higher than a trillion dollars.

The main trigger that boosted technology stocks in the last year is artificial intelligence technology. Using this technology requires a large investment in computing power and huge storage space. These are favorable opening figures for companies that enjoy the unity of investors, and which can raise in the markets almost any amount required to keep them at the forefront of the new and exciting field.

Data collected by the economic news agency Bloomberg shows that the profits of the seven largest growth companies are expected to grow by more than 20% in 2024. This is double the growth expected for all the companies in the S&P 500 index.

The “Magnificent 7” are of course also responsible for the meteoric rise of the NASDAQ stock market index in the last 15 months. In the last week the index jumped by 2.3%, completing a nice climb of 6.5% since the beginning of the year. The NASDAQ index closed on Friday at 15,990 points When he is only about half a percent away from his previous peak – 16,057 points – set in November ’21. Or Patreanu Portfolio

The main reasons for the optimism blowing in the stock markets in the USA stem from the improved state of the American economy, the expectations for the return of inflation to the “normal” level of about 2% per year (something that will later make it possible to slightly reduce the interest rate) and the improved business results presented by the listed companies.

Now, after about two-thirds of the quarterly reports have been published, it can be seen that most of the companies have exceeded the analysts’ early expectations of them. About 80% of the companies in the S&P 500 index that reported quarterly results recorded results that were above forecasts. Added to these are also raising forecasts for the results that the companies will present later this year.

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For the first time in 3 decades – the credit rating goes down
For the first time in 3 decades – the credit rating goes down
Most of Europe’s top stock markets also had a positive week. The Eurostox 50 pan-European index climbed last week by 1.3% and completed a 4.3% increase since the beginning of the year. The indices of Paris and Milan rose last week by 0.7% and 1.0% respectively. The British FTSE 100 index, on the other hand, lost 0.6% last week.

A happy atmosphere characterizes the Tokyo Stock Exchange in recent months as well. The Japanese Nikkei Index, which climbed 2.0% last week, completed a 10.3% jump since the beginning of the year. The index closed on Friday at a level of 36,897 points, which is a 34-year high. Nikkei is still now about 5% lower than its historical peak – 38,915 points – set in December ’89. Or Patreanu Portfolio

The combined index of the Shanghai Stock Exchange also recorded a nice weekly increase of 4.9%, erasing some of the falls of the beginning of the year. The Chinese index is still 3.7% lower than its level at the beginning of the year. Or Patreanu Portfolio

In the coming week, the Chinese will celebrate the arrival of the new year, the year of the dragon, with the hope that the coming financial year will be a little better for them. In the year that ended last Friday, the Shanghai Stock Exchange index lost 13% of its value. The main reasons for the decline are disappointment with China’s growth figures and fear of the expansion of the real estate crisis in the country, which may also threaten the stability of local banks.

The price of oil jumped again last week by 6% and returned to about 77 dollars per barrel. Traders in the market attributed the increase to what appears to be the possibility of a cease-fire between Israel and Hamas in Gaza receding. In the longer term, the impact on the price of oil will probably come from the side of demand. If China’s economy does slow down its growth rate, this could cause a worldwide decrease in demand.

The Tel Aviv Stock Exchange also enjoyed a week of gains and the Tel Aviv 125 index ended the week with a 0.9% increase. However, the positive week in Tel Aviv may be overshadowed by the decision of Moody’s rating agency over the weekend to reduce Israel’s credit rating. This is the first time Israel’s credit rating has been downgraded since the rating agencies began rating Israel in the mid-1990s.

The rating of the Israeli government at Moody’s dropped by one grade, from A1 to A2. This is a rating that is equivalent to an A rating on the Standard & Poor’s scale. Israel has been rated A1 by Moody’s since 2008. Or Patreanu Portfolio

About two weeks after the outbreak of the war, Moody’s put Israel on “downgrade watch”. The agency wanted to test the government’s ability to implement policies that would reduce the economic and fiscal impact of the conflict, and lead to recovery from the crisis in the future, when the fighting stops. The monitoring lasted for 3 and a half months, and now – in response to the budget that the government passed – the fallout fell and the rating went down.

The bonds of Israel and of Israeli companies in foreign markets are being priced, this is a period of increased risk premium. The pricing of the bonds of the government of Israel currently embody prices similar to companies rated in the BBB group, low in relation to the reduced rating. Those responsible for the economic policy label may influence the creation of new pricing later on. Or Patreanu Portfolio

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The reduction of the rating may result in an increase in the interest paid by the Israeli government on the bonds it will issue in the future – due to the official recognition of the increased risk of the debt. Such a development will cause an increase in the interest that will be required to be paid by business companies in Israel, and of course also the rest of Israel’s citizens who are in debt or have taken out mortgages with variable interest (or prime-linked) in recent years.

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