💰 The markets see an epic shake-up last week, revealing a period ripe for strategic maneuvering.
💹 $Lockheed Martin(LMT)$/$Huntington Ingalls(HII)$/$AeroVironment(AVAV)$: Aerospace and defence sector outperformed gold.
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Not the only thing that shines.
| Market recap
The global market faced significant volatility last week, comparable to the thrill of a free-fall ride. On a positive note, $S&P 500(.SPX)$ gained 5.7% and $NASDAQ(.IXIC)$ rose by 7.3% throughout the week—looking quite impressive! Unfortunately, both indices have reverted to levels seen in early August of last year, with a low that briefly touched on levels expected in early 2024.
The instability can be attributed to Trump's inconsistent tariff policies, which nearly led to a collapse of all asset classes: U.S. stocks faced indiscriminate selling, U.S. Treasuries plummeted due to rising yields, and the dollar index fell below the 100 mark.
Risk-taking sentiments are widespread, while risk-averse behaviors are real. Safe-haven assets strengthened, with gold hitting new highs. However, gold is not the only thing that moved the market; please read on.
Megacaps - freaking out, or breaking out?
$Apple(AAPL)$ led the Magnificent Seven on Friday, rising 5.5% in pre-market trading due to tariff exemptions. $NVIDIA(NVDA)$ also saw a pre-market increase of 2.5%.
On April 12, the U.S. government announced that smartphones, computers, and other electronic products would be excluded from counter-tariffs, alleviating production transfer pressures on the iPhone and offsetting potential price increases.
However, due to the volatile nature of tariff policies, AAPL remains highly susceptible to significant impacts, if not the most affected.
MAGA - Capt. America
The strong rebound on Friday was primarily attributed to the Federal Reserve, which received applause from the market for its proactive stance.
On that day, Boston Fed President Susan Collins stated that the Fed is "absolutely" prepared to help stabilize the market if necessary, which led to an expansion of gains in U.S. stocks during the day.
Top Movers - biotech, airlines, gold
The FDA announced it would forego animal testing in drug development, which catalyzed significant gains in AI-driven pharmaceutical development concepts, with $Recursion Pharmaceuticals, Inc.(RXRX)$ up 28%, $Schrodinger Inc.(SDGR)$ up 27%, and $Certara, Inc.(CERT)$ up 23%.
Boosted by positive earnings and market sentiment, airline stocks rose, with $Delta Air Lines(DAL)$ up 3.9%, $United Continental(UAL)$ up 4.5%, and $LATAM Airlines Group SA(LTM)$ up 5.7%.
The gold rally continued, with $Direxion Daily Gold Miners Index Bull 2X Shares(NUGT)$ up 11%, $Wheaton Precious Metals(WPM)$ up 5.4%, $Harmony Gold Mining(HMY)$ up 6.5%, and $Newmont Mining(NEM)$ up 7.9%.
| A national emergency
$iShares U.S. Aerospace & Defense ETF(ITA)$ rebounded significantly, gaining 10% last week, outpacing $SPDR Gold Shares(GLD)$ , which rose 6.5%.
With the acceleration of European defense autonomy and U.S. military modernization, there is strong long-term growth potential; investors are advised to seize this strategic investment opportunity.
Key bullish points include the exemption of 17 critical areas from budget cuts, increased European defense spending, and the prioritization of Indo-Pacific deterrence and homeland security by the Trump administration. Additionally, a robust supply chain resilience and increased military aid to Ukraine and Israel are expected to drive growth in the sector.
| Hit the Button
Despite an overall market decline due to tariff issues, the rise in the aerospace and defense sector reflects investors' recognition of future growth potential.
It's the right time to invest in defense stocks as fears around DOGE are priced in and the sentiment for risk aversion is widespread.
LMT - The defence conglomerate
$Lockheed Martin(LMT)$ is behind some of the most powerful (and expensive) weapon programs in the U.S., such as the F-35. The accelerated global deployment of the F-35 and advancements in hypersonic weapons research and development represent long-term benefits.
LMT is active across all military sectors, focusing on advanced technologies and aerospace, and is also heavily involved in cyber defense as well as naval systems (including the Aegis Combat System and Long-Range Anti-Ship Missiles).
LMT plans to collaborate with Google Cloud to utilize AI for training, deploying, and maintaining its AI models, thus accelerating the use of AI in national security, aerospace, and scientific applications.
HII - Gaining in a 3-day streak
$Huntington Ingalls(HII)$ focuses on shipbuilding, including the Ford-class aircraft carriers, the largest military vessels in the world.
The company is responsible for constructing the majority of the U.S. Navy's ships, including aircraft carriers, submarines, amphibious ships, and destroyers.
The shipbuilding industry has now become a limiting factor in U.S. naval construction, with the country needing a decade-long process to enhance its shipyard capacity to keep pace with China.
AVAV - Up 31% last week
$AeroVironment(AVAV)$ is one of the largest drone suppliers to the U.S. military.
Currently, the company’s products are widely utilized across the global defense industry, government, and private sector.
AVAV saw its stock price rise 31% over the past week, primarily due to the U.S. Army canceling a shutdown order against it. This development not only marks a successful restoration of important contracts with the U.S. government but also reflects market confidence in the company’s ability to overcome production disruptions and challenges in international sales.
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