Martin North – Page 143 – Digital Finance Analytics (DFA) Blog

More Ups and Downs – Market Update 5th Feb 2022

The S&P 500 turned positive Friday, aided by a rally in Amazon and an unexpectedly strong monthly jobs report that sent U.S. Treasury yields to two-year highs.

The S&P 500 rose 0.52% to 4,500, , the Dow Jones Industrial Average slid 0.06% to 35,089 while the NASDAQ rallied 1.58% to 14,098.

The U.S. economy created 467,000 jobs last month, well above the expectations for 150,000, led by job gains in the leisure and hospitality sector, which confounded expectations that an omicron-impact would weigh on the services industry.

“The jobs data today was incredibly strong, even before the stellar revisions, so the Fed has the green light to start moving oﬀ of zero very soon,” said Jamie Cox, managing partner for Harris Financial Group.

The report suggests demand for labour remains robust and further reinforces Fed chairman Jerome Powell’s description last week of the labour market as “strong”.

Average hourly earnings increased by a better than expected 0.7% for the month, while the unemployment rate ticked higher to 4%.

An unexpectedly strong number isn’t likely to change the Fed’s thinking on policy but may serve to drown out “the ‘policy mistake’ narrative in the market that bubbled up as the Fed turned more hawkish in recent months,” Jefferies said in a note.

U.S. yields surged on expectations for more aggressive Fed action, with the U.S. 10-year yield jumping 4.85% to 1.916 for the first time in two years. The two-year yield rose to 1.316 per cent; the five-year yield reached 1.78 per cent.

Tech climbed out of early-day trouble against the backdrop of rising rates as surge in Amazon restored sentiment on growth somewhat after Meta’s plunge a day earlier.

Go to the Walk The World Universe at https://walktheworld.com.au/

The Wild Rides Continues…

Well, as expected market volatility and momentum continues to rattle investors. I see no end to this in the short term, with a tendency to go lower ahead. In fact the worst selloff in technology shares since fall 2020 sent U.S. equity indexes reeling, halting a four-day rebound. The NASDAQ 100 shed 4.2% and the S&P 500 fell 2.4% as Facebook-owner Meta Platforms Inc. suffered a historic rout that wiped more than $250 billion from its value.

That said the dour mood lifted some in late trading after Amazon.com Inc.’s results sent shares in the online retailer soaring 15%. The third biggest company in the S&P 500, Amazon’s roughly $1.5 trillion market capitalization is more than double Meta’s.

More broadly, “As markets focus closely on large, developed-market monetary policy stances — and investor sentiment around the globe shifts — economic activity data releases will be key.”

Go to the Walk The World Universe at https://walktheworld.com.au/

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“Rates Can Go Up: Make Sure You Have Buffers”…

Glass Half Full Lowe signaled a major shift in the bank’s outlook for the cash rate at the RBA’s annual address to the National Press Club in Sydney on Wednesday, striking an upbeat tone in the economy but downplaying local inflation risks and to explain the central bank’s rationale and its forecasts for the year ahead.

In his subsequent remarks he gave some “Financial Advice” saying rates may well rise, and households should have some buffers. Sound of door slamming shut after the horse has bolted…

Interest rates could plausibly lift off later this year if the economy continues to outperform expectations, Reserve Bank of Australia governor Philip Lowe has conceded, but he repudiated markets pricing four rate hikes in 2022.

Go to the Walk The World Universe at https://walktheworld.com.au/

Today’s post is brought to you by Ribbon Property Consultants.

If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you.

Buying property, is both challenging and adversarial. The vendor has a professional on their side.

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DFA Live Q&A HD Replay: Investing Today With Damien Klassen

This is an edited version of a live discussion as I discuss the current state of the markets with the Head of Investments at Walk The World Fund, and Nucleus Wealth, Damien Klassen. What is the outlook, and what protections are in place if things go down?

Go to the Walk The World Universe at https://walktheworld.com.au/

FINAL REMINDER: DFA Live 8pm Sydney Tonight: Investing Now With Damien Klassen

Join us for a live discussion as I discuss the current state of the markets with the Head of Investments at Walk The World Fund, and Nucleus Wealth, Damien Klassen. What is the outlook, and what protections are in place if things go down? You can ask a question live

A Matter Of Perspective: “Put” Your Game Face On!

At times this week, as Wall Street and the ASX have swung from strong gains to heavy losses within the space of hours, that mood has felt a lot like panic.

In another week of severe equity turbulence, the S&P 500 saw three of the biggest intraday reversals of the decade, Microsoft Corp. swung 15% in 15 hours, and stock volatility doubled.

In the end, for one last twist, the index rallied Friday, erasing losses for the week to post one of its smallest wire-to-wire moves in months.
It was the final irony for a week in which investors just couldn’t make up their minds, amid a panoply of warring narratives. On one side was Jerome Powell, suddenly the enemy, refusing to commit to keeping rate hikes gradual. On the other was the booming economy, promising to blot out the impact of anything the Federal Reserve might throw in its path.

Beneath it all was dwindling liquidity, the thinnest since the pandemic crisis, making every swing worse and sending traders to the options market for protection like never before. Trepidation, with total put option trading surging to a record.

Over at investment bank KBW, two types of traders stood out to R.J. Grant, the director of equity trading. Those bailing in order to go bargain hunting later, and those who are just bailing.

The FED’s Much Ado About Nothing…

Today we heard from the FED after their meeting, and the language was still vague and I thought unconvincing. In his press conference that followed the Fed decision, Powell said The Fed’s monetary policy actions have been guided by their mandate to promote maximum employment and stable prices for the American people. There was “quite a bit of room to raise rates without hurting jobs,” stoking expectations that the Fed’s plan to tighten monetary policy measures, which have underpinned risk assets, may be more aggressive than expected.

He said we understand that our actions affect communities, families, and businesses across the country. Everything we do is in service to our public mission. We at the Federal Reserve will do everything we can to achieve our maximum employment and price stability goals.

They are still buying more bonds, so increasing their balance sheet, and did not change their interest rate target. As a result, the S&P 500 closed lower Wednesday, as tech gave up some gains on surging U.S bond yields after Federal Reserve Chairman Jerome Powell hinted that there was plenty of runway to raise rates, with the first hike widely expected in March.

“Powell during the question session here is creating a bit of uncertainty, and I think that’s why the market is reacting this way. He’s talking about inflation might worsen, bottlenecks might get worse. What he’s trying to do is prepare the market for a worsening situation and also trying to balance the fear factor. But it seems the responses are creating an atmosphere of uncertainty, which is a negative for the market”.

Go to the Walk The World Universe at https://walktheworld.com.au/

Today’s post is brought to you by Ribbon Property Consultants. If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you. Buying property, is both challenging and adversarial. The vendor has a professional on their side.

Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make. Edwin understands your needs. So why not engage a licensed professional to stand alongside you. With RPC you know you have: experience, knowledge, and master negotiators, looking after your best interest.

Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.