The first half of 2023 has been better than investors had any right to expect, given the scale of last year's stock market meltdown.
The war in Ukraine, runaway inflation, post-coronavirus supply shortages and continued lockdowns in China sent the S&P 500 spiralling 20 per cent and into an official bear market.
Apple, Amazon, Facebook, Tesla and the other technology companies finally came unstuck after a decade of dominance, resulting in the Nasdaq crashing by a third.
Politically and economically, this year has been even bumpier. The war in Ukraine is continuing, inflation is sticky and interest rates have soared (with more to come).
We have also suffered a banking crisis, a US debt ceiling stand-off, a disappointing Chinese reopening and there are now growing fears of a global recession.
Watch: What is the US debt ceiling?
Yet, despite all the grim news, investors have something to celebrate with the S&P 500 index jumping 20 per cent since last October, marking an official bull market.
So, can markets climb higher or have investors got carried away?
Many are wary about the bull run, with Morgan Stanley strategist Michael Wilson struggling to “get on board with the current excitement” as fiscal support, market liquidity and company revenue look set to fade.
“If second-half growth re-accelerates as expected, then the bullish narrative being used to support equity prices will be proven correct. If not, many may be in for a rude awakening,” Mr Wilson says.
There is a path ahead for stocks in the second half of the year but it is a narrow one, says Mark Haefele, chief investment officer for global wealth management at Swiss private bank UBS.
For markets to rally further, three things need to happen. First, interest rates must peak, with the US Federal Reserve raising its funds rate no more than twice from today’s 5.25 per cent, after June’s pause.
There are grounds for optimism here, Mr Haefele says.
“Lower headline and core inflation, alongside challenges faced by US regional banks, have boosted market conviction that the Fed is close to the end of its hiking cycle.”
For markets to continue rising, the widely predicted US recession also has to be cancelled.
Hopes are rising as economic growth and corporate earnings prove sturdier than expected, as consumers continue to spend while the jobs market holds up, Mr Haefele says.
“Confidence that a recession can be avoided could increase if real income growth continues to improve, companies start restocking inventories and the labour market remains robust,” he says.
Finally, we need the buzz surrounding artificial intelligence, which has largely driven this year’s growth, to prove justified, rather than driven by hype and a fear of missing out.
The “surging seven” US mega-cap growth stocks – Apple, Microsoft, Nvidia, Amazon, Meta, Tesla and Alphabet – have risen by an average of 86 per cent this year amid optimism about the effect of AI on their long-term prospects, Mr Haefele says.
“These seven stocks account for 80 per cent of the gains in the S&P 500, so a positive market outlook is contingent on these stocks holding on to or extending their gains.”
Yet it may not be possible for all three wishes to come true at the same time. If the economy continues to grow, interest rates may have to climb even higher.
After a strong run, the upside to stocks is now limited, Mr Haefele says.
“Risks to the US growth outlook remain, and increasingly bullish equity market sentiment speaks against chasing the S&P 500 higher.”
Rather than piling into tech shares at today’s highs, he suggests investors focus on cheaper parts of the market that have lagged in the rally, and diversify into bonds, infrastructure and gold.
Although Fed Chairman Jerome Powell is making a case for two more interest rate increases, with US inflation falling to 4.1 per cent in May, we are close to the end of the tightening cycle, says Vijay Valecha, chief investment officer at Century Financial.
Jobs growth, resilient consumers and a historically low unemployment rate mean “the bull case remains strong”, he says.
Mr Valecha is also wary of the AI frenzy, which has pushed valuations close to bubble territory.
“The AI rally is partly driven by genuine advances in technology and partly by investor euphoria. The benefits of AI are likely to manifest over the long-term and are not yet showing up in the fundamentals of AI stocks.”
As the lagged impact of monetary tightening slows the economy further, a correction cannot be ruled out, he adds.
The AI rally is partly driven by genuine advances in technology and partly by investor euphoria
Vijay Valecha,
chief investment officer at Century Financial
After all the first-half excitement, investors may need to settle down and be patient.
Broker Charles Schwab says weak leading indicators, rising unemployment, the top-heavy rally, AI hype and frothy markets suggest that the year’s “second half may be marked by less drama, but milder returns for investors”.
Amundi Asset Management reckons the global economy faces a “narrow and uncertain path” as growth slows and bottoms out in the second half of 2023 year, but with a potential recovery due next year.
Group chief investment officer Vincent Mortier urges caution after recent excitement as the slowdown in inflation will only be gradual, with price growth remaining above central banks' targets until the middle of next year.
Emerging markets are expected to fare best as the Fed stops tightening and the US dollar starts to depreciate, he says.
History suggests that 2023 could still end on a positive note. Research from Sam Stovall, chief investment strategist at financial analyst CFRA, shows that since 1945, a strong first half of the year is also highly correlated with gains in the second half.
That is a positive sign, but hardly concrete. Mr Stovall warns that historical performance is never a guarantee when it comes to the stock market.
If the analysts are correct, investors should be happy with their first-half gains, but not set their sights too high for the second half.
The real action will arrive in 2024.
The specs: 2018 Audi RS5
Price, base: Dh359,200
Engine: 2.9L twin-turbo V6
Transmission: Eight-speed automatic
Power: 450hp at 5,700rpm
Torque: 600Nm at 1,900rpm
Fuel economy, combined: 8.7L / 100km
Indoor Cricket World Cup
Venue Insportz, Dubai, September 16-23
UAE squad Saqib Nazir (captain), Aaqib Malik, Fahad Al Hashmi, Isuru Umesh, Nadir Hussain, Sachin Talwar, Nashwan Nasir, Prashath Kumara, Ramveer Rai, Sameer Nayyak, Umar Shah, Vikrant Shetty
Mrs%20Chatterjee%20Vs%20Norway
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MOUNTAINHEAD REVIEW
Starring: Ramy Youssef, Steve Carell, Jason Schwartzman
Director: Jesse Armstrong
Rating: 3.5/5
500 People from Gaza enter France
115 Special programme for artists
25 Evacuation of injured and sick
Quick%20facts
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The specs
Engine: 4.0-litre V8 twin-turbocharged and three electric motors
Power: Combined output 920hp
Torque: 730Nm at 4,000-7,000rpm
Transmission: 8-speed dual-clutch automatic
Fuel consumption: 11.2L/100km
On sale: Now, deliveries expected later in 2025
Price: expected to start at Dh1,432,000
COMPANY%20PROFILE
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LA LIGA FIXTURES
Friday
Granada v Real Betis (9.30pm)
Valencia v Levante (midnight)
Saturday
Espanyol v Alaves (4pm)
Celta Vigo v Villarreal (7pm)
Leganes v Real Valladolid (9.30pm)
Mallorca v Barcelona (midnight)
Sunday
Atletic Bilbao v Atletico Madrid (4pm)
Real Madrid v Eibar (9.30pm)
Real Sociedad v Osasuna (midnight)
Other ways to buy used products in the UAE
UAE insurance firm Al Wathba National Insurance Company (AWNIC) last year launched an e-commerce website with a facility enabling users to buy car wrecks.
Bidders and potential buyers register on the online salvage car auction portal to view vehicles, review condition reports, or arrange physical surveys, and then start bidding for motors they plan to restore or harvest for parts.
Physical salvage car auctions are a common method for insurers around the world to move on heavily damaged vehicles, but AWNIC is one of the few UAE insurers to offer such services online.
For cars and less sizeable items such as bicycles and furniture, Dubizzle is arguably the best-known marketplace for pre-loved.
Founded in 2005, in recent years it has been joined by a plethora of Facebook community pages for shifting used goods, including Abu Dhabi Marketplace, Flea Market UAE and Arabian Ranches Souq Market while sites such as The Luxury Closet and Riot deal largely in second-hand fashion.
At the high-end of the pre-used spectrum, resellers such as Timepiece360.ae, WatchBox Middle East and Watches Market Dubai deal in authenticated second-hand luxury timepieces from brands such as Rolex, Hublot and Tag Heuer, with a warranty.
Specs
Engine: Dual-motor all-wheel-drive electric
Range: Up to 610km
Power: 905hp
Torque: 985Nm
Price: From Dh439,000
Available: Now
GREATEST ROYAL RUMBLE CARD
The line-up as it stands for the Greatest Royal Rumble in Saudi Arabia on April 27
50-man Royal Rumble
Universal Championship
Brock Lesnar (champion) v Roman Reigns
Casket match
The Undertaker v Rusev
Intercontinental Championship
Seth Rollins (champion) v The Miz v Finn Balor v Samoa Joe
SmackDown Tag Team Championship
The Bludgeon Brothers v The Usos
Raw Tag Team Championship
Sheamus and Cesaro v Bray Wyatt and Matt Hardy
United States Championship
Jeff Hardy (champion) v Jinder Mahal
Singles match
Triple H v John Cena
To be confirmed
AJ Styles will defend his WWE World Heavyweight title and Cedric Alexander his Cruiserweight Championship, but matches have yet to be announced
UAE currency: the story behind the money in your pockets
Normcore explained
Something of a fashion anomaly, normcore is essentially a celebration of the unremarkable. The term was first popularised by an article in New York magazine in 2014 and has been dubbed “ugly”, “bland’ and "anti-style" by fashion writers. It’s hallmarks are comfort, a lack of pretentiousness and neutrality – it is a trend for those who would rather not stand out from the crowd. For the most part, the style is unisex, favouring loose silhouettes, thrift-shop threads, baseball caps and boyish trainers. It is important to note that normcore is not synonymous with cheapness or low quality; there are high-fashion brands, including Parisian label Vetements, that specialise in this style. Embraced by fashion-forward street-style stars around the globe, it’s uptake in the UAE has been relatively slow.
What is graphene?
Graphene is a single layer of carbon atoms arranged like honeycomb.
It was discovered in 2004, when Russian-born Manchester scientists Andrei Geim and Kostya Novoselov were "playing about" with sticky tape and graphite - the material used as "lead" in pencils.
Placing the tape on the graphite and peeling it, they managed to rip off thin flakes of carbon. In the beginning they got flakes consisting of many layers of graphene. But as they repeated the process many times, the flakes got thinner.
By separating the graphite fragments repeatedly, they managed to create flakes that were just one atom thick. Their experiment had led to graphene being isolated for the very first time.
At the time, many believed it was impossible for such thin crystalline materials to be stable. But examined under a microscope, the material remained stable, and when tested was found to have incredible properties.
It is many times times stronger than steel, yet incredibly lightweight and flexible. It is electrically and thermally conductive but also transparent. The world's first 2D material, it is one million times thinner than the diameter of a single human hair.
But the 'sticky tape' method would not work on an industrial scale. Since then, scientists have been working on manufacturing graphene, to make use of its incredible properties.
In 2010, Geim and Novoselov were awarded the Nobel Prize for Physics. Their discovery meant physicists could study a new class of two-dimensional materials with unique properties.
Match info
Bournemouth 0
Liverpool 4 (Salah 25', 48', 76', Cook 68' OG)
Man of the match: Andrew Robertson (Liverpool)
The specs: McLaren 600LT
Price, base: Dh914,000
Engine: 3.8-litre twin-turbo V8
Transmission: Seven-speed automatic
Power: 600hp @ 7,500rpm
Torque: 620Nm @ 5,500rpm
Fuel economy 12.2.L / 100km
