Portfolio Mix

Abbott Labs is 132 years old. But that doesn't disqualify the well-established company from delivering solid growth. The consensus among Wall Street analysts is that the healthcare giant will be able to deliver double-digit-percentage annual earnings growth over the next five years. The company markets COVID-19 tests across five diagnostic platforms. As of July 17, Abbott had shipped more than 22 million COVID-19 tests. Expect continued strong demand at least through 2021. Last month, Abbott announced US approval of its next-generation integrated continuous glucose monitor (CGM), FreeStyle Libre 2, now for both adults and children over age 4. Compared to Abbott’s current, market-leading CGM Libre, the long-awaited Libre 2 offers optional real-time high and low glucose alarms, better (potentially best-in-class) accuracy, and a pediatric indication. The new label meaningfully expands Libre’s opportunity in the massive still-underpenetrated US diabetes market and the news is highly positive.

The monetary policy meet last week saw US Federal Reserve keeping the monetary spigots open and they have assured the markets that the emergency measures adopted in the aftermath of the pandemic will continue for the time being. World’s biggest tech companies; Apple, Amazon, Facebook and Alphabet, have posed stellar results for the last quarter with each one of them beating street expectations. For long investors have been concerned that there was a tech bubble, but those concerns have been allayed with fundamentals now backing up the share price. The markets might be too concentrated in favor of these companies, but the truth is that these companies have been performing really well. The benchmark index is in a strong bull trend and falls from overbought condition should be bought.

Dollar is expected to remain under pressure as the U.S. economic recovery from COVID-19 slows down and as Republicans and Democrats in the U.S. fail to reach a consensus over the latest stimulus measures. Data released on Thursday showed that the U.S. economy contracted by 32.9% in the second quarter and that 1.434 million unemployment claims were submitted in the week ending July 25. Meanwhile, U.S.-China tensions simmered over the weekend after U.S. President Trump threatened to ban popular video app TikTok, and Secretary of State Michael Pompeo stated that the U.S. will act shortly on Chinese software companies that are providing data directly to the Beijing government, thus posing a risk to U.S. national security. All of this coupled with a fresh leg down in the US Treasury bond yields will further undermine the greenback demand and boost the safe-haven Yen.

Spot gold tagged a fresh record high of $1990 on the first day of August as the search for haven assets continued amid coronavirus pandemic. The decline in the dollar combined with drop in real bond yields to an all-time low of -1% has been a boon for gold, which boasted a gain of nearly 11% in July, the best monthly performance in more than four years. Given how quickly gold prices have rallied, the risk of a temporary pullback has risen. However, the balance of risks remains skewed to the upside for gold primarily supported by unwavering support from Central banks in the form of liquidity injections and easing monetary policies. These measures are likely to remain in place for the foreseeable future in this uncertain economic climate which will keep bond yields low, lift inflation expectations and in-turn make gold more attractive.

A resurfacing of geopolitical and economic concerns are buoying prices for haven assets like government bonds. Republicans and Democrats in the U.S. failed to reach a consensus over the latest stimulus measures while investors remained concerned over the economic recovery as data showed that the U.S. economy contracted by 32.9% in the second quarter. Meanwhile, U.S.-China tensions simmered over the weekend after U.S. President Trump threatened to ban popular video app TikTok, and Secretary of State Michael Pompeo stated that the U.S. will act shortly on Chinese software companies that are providing data directly to the Beijing government, thus posing a risk to U.S. national security. All of this coupled with a fresh leg down in the US Treasury bond yields will boost the safe-haven demand. Uncertainty is likely to be the theme going forward which should support prices of the treasury bonds.