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Scottish Mortgage (SMT) Shares Are Up 11.3% in a Month. What’s Next?

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Updated 14 Jul 2022

Key points:

  • The Scottish Mortgage share price has risen 11.3% in a month.
  • The rally coincided with a recovery in US stock indices.
  • However, is the worst over yet for SMT shares? Read on to find out.

The Scottish Mortgage Investment Trust PLC (LON: SMT) share price has risen 11.35% in the past month as US stocks recovered, which has left many wondering, is the worst over yet for SMT shares?

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The short answer is that while the latest rally is encouraging, the worst is not over yet for US stocks and SMT, by extension, given its significant exposure to US growth stocks. The latest inflation data from the US indicated that the CPI rose to 9.1% in June, the highest record in 40 years.

Also read: 12 Best Shares To Buy As A Beginner.

The extremely high inflation data combined with the robust employment data almost guarantee that the Federal Reserve will hike interest rates by 0.75% at its meeting towards the end of this month.

Investors familiar with what has been going on in the stock markets know that the Fed’s tighter monetary policies have seen it raise interest rates aggressively in the past few months while withdrawing liquidity from the markets is the primary driver behind the stock market selloff.

Some of the top stocks held by Scottish Mortgage Trust, such as Tesla, have seen their share price fall over 40%, while Moderna is down 27% in 2022, and Nvidia is down 49.7%. SMT’s top holdings decline reflected in its performance this year since SMT shares are down 40.2%.

The latest rally in SMT shares is driven by a recovery witnessed in US stock markets, which could persist if certain factors remain constant. The market volatility indicator (VIX) has been falling after spending a lot of time at elevated levels.

The latest rally could continue if the VIX continues to fall from the elevated levels it has been trading at since April. However, the VIX was headed higher at writing, derailing the latest rally.

Furthermore, a strong earnings season could favour SMT if its portfolio companies report excellent numbers for the calendar Q2 period, but this will not be the case for Tesla, which is currently laying off employees.

Overall, we cannot say that the worst is over yet for SMT shares, but investors should appreciate the recent rally as long as it lasts.

*This is not investment advice. Always do your due diligence before making investment decisions.

SMT share price.

Scottish Mortgage (SMT) share price 14-07-2022
Source: Tradingview

The Scottish Mortgage (SMT) share price has rallied 11.3% in the past month. Is the worst over now?