Tag: Market Update

Market Optimism Continues Thanks To US Soft Landing Hopes…

This is our weekly market update.

As we count down to the end of the year, U.S. stocks closed higher on Friday, with the S&P 500 and Nasdaq notching their highest closing levels since early 2022 and the Dow notched its longest weekly winning streak since 2019.

A robust U.S. jobs report fuelled investor optimism about a soft landing for the economy and so investors pared bets that the Federal Reserve will cut interest rates in March after a Labor Department report showed nonfarm payrolls increased by 199,000 jobs in November, compared with an estimated increase of 180,000.

The unemployment rate slipped to 3.7%, while average earnings edged up to 0.4% on a monthly basis, compared with forecasts of 0.3% growth. The uptick in wage growth, which risks boosting inflation, muddied the optimism for rate cuts, pushing Treasury yields higher, though some economists were quick to downplay the strength of report attributed to the return of employers that were on strike.

“Were it not for the strike, November would have been somewhere around 170k and October would have been around 180,000,” Jefferies said in a Friday note.

Interest rate futures show traders widely expect the Federal Reserve to hold interest rates steady at its meeting next week. However, futures prices now imply traders mostly expect the Fed to start cutting rates in May, two months later than the March meeting many investors had been betting on in recent days.

Treasurer Jim Chalmers confirmed the Reserve Bank of Australia board should aim to return inflation to the middle of the 2 to 3 per cent target band, or 2.5 per cent. Treasurer Jim Chalmers has axed a controversial proposal requiring the Reserve Bank of Australia to give “equal consideration” to full employment and inflation as part of a new agreement that may mean interest rates stay higher for longer.

The backdown followed warnings by the likes of former RBA governor Ian Macfarlane and former treasurer Peter Costello, who said the proposed wording was vague and would make the RBA less accountable for fighting inflation.

IFM Investors chief economist Alex Joiner said targeting the middle of the band made the prospect of a rate cut unlikely until late 2024, given the RBA’s current inflation forecasts do not show it achieving 2.5 per cent inflation at any point in the next couple of years.

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Market Optimism Continues Thanks To US Soft Landing Hopes...
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Market Optimism Continues Thanks To US Soft Landing Hopes…

This is our weekly market update.

As we count down to the end of the year, U.S. stocks closed higher on Friday, with the S&P 500 and Nasdaq notching their highest closing levels since early 2022 and the Dow notched its longest weekly winning streak since 2019.

A robust U.S. jobs report fuelled investor optimism about a soft landing for the economy and so investors pared bets that the Federal Reserve will cut interest rates in March after a Labor Department report showed nonfarm payrolls increased by 199,000 jobs in November, compared with an estimated increase of 180,000.

The unemployment rate slipped to 3.7%, while average earnings edged up to 0.4% on a monthly basis, compared with forecasts of 0.3% growth. The uptick in wage growth, which risks boosting inflation, muddied the optimism for rate cuts, pushing Treasury yields higher, though some economists were quick to downplay the strength of report attributed to the return of employers that were on strike.

“Were it not for the strike, November would have been somewhere around 170k and October would have been around 180,000,” Jefferies said in a Friday note.

Interest rate futures show traders widely expect the Federal Reserve to hold interest rates steady at its meeting next week. However, futures prices now imply traders mostly expect the Fed to start cutting rates in May, two months later than the March meeting many investors had been betting on in recent days.

Treasurer Jim Chalmers confirmed the Reserve Bank of Australia board should aim to return inflation to the middle of the 2 to 3 per cent target band, or 2.5 per cent. Treasurer Jim Chalmers has axed a controversial proposal requiring the Reserve Bank of Australia to give “equal consideration” to full employment and inflation as part of a new agreement that may mean interest rates stay higher for longer.

The backdown followed warnings by the likes of former RBA governor Ian Macfarlane and former treasurer Peter Costello, who said the proposed wording was vague and would make the RBA less accountable for fighting inflation.

IFM Investors chief economist Alex Joiner said targeting the middle of the band made the prospect of a rate cut unlikely until late 2024, given the RBA’s current inflation forecasts do not show it achieving 2.5 per cent inflation at any point in the next couple of years.

Santa Rally Incoming?

This is our weekly market update. As always we start in the US, cover oil and gold, as well as treasuries, and then move through Europe and Asia before we cover Australian developments and crypto. A succinct summary of the weeks events.

A searing late-year rally has brought the S&P 500 to a fresh 2023 closing high, as investors bet the Federal Reserve is done raising interest rates and the U.S. economy will remain resilient in the face of tighter monetary policy.

Fed Chair Jerome Powell said the risks of hiking interest rates too much and slowing the economy more than necessary have become “more balanced” with the risks of not hiking enough to control inflation. He vowed to move “carefully” on interest rates.

Earlier this week Investor optimism about rate cuts surged after Fed Governor Christopher Waller – widely seen as a hawkish policymaker – flagged the possibility of lower interest rates in coming months if inflation continued to ease.

So, is the Fed is at risk of committing a major policy error if it begins to loosen monetary conditions too soon, which could see inflationary pressures begin to pick up again? If anything, the Fed has more room to raise interest rates than to cut them, presuming it follows the numbers. Indeed, U.S. government data released Thursday showed that the U.S. economy grew at a faster-than-expected 5.2% annual rate in the third quarter amid surprisingly robust consumer spending.

http://www.martinnorth.com/

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

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Santa Rally Incoming?
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Santa Rally Incoming?

This is our weekly market update. As always we start in the US, cover oil and gold, as well as treasuries, and then move through Europe and Asia before we cover Australian developments and crypto. A succinct summary of the weeks events.

A searing late-year rally has brought the S&P 500 to a fresh 2023 closing high, as investors bet the Federal Reserve is done raising interest rates and the U.S. economy will remain resilient in the face of tighter monetary policy.

Fed Chair Jerome Powell said the risks of hiking interest rates too much and slowing the economy more than necessary have become “more balanced” with the risks of not hiking enough to control inflation. He vowed to move “carefully” on interest rates.

Earlier this week Investor optimism about rate cuts surged after Fed Governor Christopher Waller – widely seen as a hawkish policymaker – flagged the possibility of lower interest rates in coming months if inflation continued to ease.

So, is the Fed is at risk of committing a major policy error if it begins to loosen monetary conditions too soon, which could see inflationary pressures begin to pick up again? If anything, the Fed has more room to raise interest rates than to cut them, presuming it follows the numbers. Indeed, U.S. government data released Thursday showed that the U.S. economy grew at a faster-than-expected 5.2% annual rate in the third quarter amid surprisingly robust consumer spending.

http://www.martinnorth.com/

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

Markets Say Confused? You Will Be…

Our latest weekly markets update.

Overall, the trading week was marked by rising expectations that the Federal Reserve will shift to cutting rates sooner and faster next year, bolstering bets among bulls that equities are poised to reset record highs in 2024.

MSCI’s index of global shares added 0.12% and headed for a monthly gain of 8.7% after investors grew increasingly confident that U.S. interest rates have peaked, with the market narrative shifting to the timing of cuts.

Bank of America strategists, have laid out an optimistic forecast for the S&P 500, predicting the index will reach a new high of 5,000 by the end of 2024. This bullish outlook follows a notable monthly surge in the index, which saw its strongest gain since July of the previous year.

The bank’s equity team has identified a transition in market dynamics from broad macroeconomic concerns to a focus on individual company performance, dubbing the current climate a “stock picker’s paradise.” This shift is underscored by a significant increase in “idiosyncratic alpha,” which suggests that stock-specific dynamics are becoming more important for generating robust returns.

But, Investors are understandably having great difficulty determining where the economy is actually headed given it has not responded as it normally would to the extraordinary tightening of monetary policy.

Some of the major banks in the world expect global economic growth to ease further in 2024, squeezed by elevated interest rates, higher energy prices and a slowdown in the world’s two largest economies.

The global economy is forecast to grow 2.9% this year, a Reuters poll showed, with next year’s growth seen slowing to 2.6%. Most economists expect the global economy to avoid a recession, but have flagged possibilities of “mild recessions” in Europe and the UK.

http://www.martinnorth.com/

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

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Markets Say Confused? You Will Be…
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Markets Say Confused? You Will Be…

Our latest weekly markets update.

Overall, the trading week was marked by rising expectations that the Federal Reserve will shift to cutting rates sooner and faster next year, bolstering bets among bulls that equities are poised to reset record highs in 2024.

MSCI’s index of global shares added 0.12% and headed for a monthly gain of 8.7% after investors grew increasingly confident that U.S. interest rates have peaked, with the market narrative shifting to the timing of cuts.

Bank of America strategists, have laid out an optimistic forecast for the S&P 500, predicting the index will reach a new high of 5,000 by the end of 2024. This bullish outlook follows a notable monthly surge in the index, which saw its strongest gain since July of the previous year.

The bank’s equity team has identified a transition in market dynamics from broad macroeconomic concerns to a focus on individual company performance, dubbing the current climate a “stock picker’s paradise.” This shift is underscored by a significant increase in “idiosyncratic alpha,” which suggests that stock-specific dynamics are becoming more important for generating robust returns.

But, Investors are understandably having great difficulty determining where the economy is actually headed given it has not responded as it normally would to the extraordinary tightening of monetary policy.

Some of the major banks in the world expect global economic growth to ease further in 2024, squeezed by elevated interest rates, higher energy prices and a slowdown in the world’s two largest economies.

The global economy is forecast to grow 2.9% this year, a Reuters poll showed, with next year’s growth seen slowing to 2.6%. Most economists expect the global economy to avoid a recession, but have flagged possibilities of “mild recessions” in Europe and the UK.

http://www.martinnorth.com/

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

When Hype And Reality Collide….

This is our weekly market update.

Here is the big question. Are U.S. stocks poised to continue their dramatic run, or is a pause ahead? That’s the question investors are asking as the S&P 500 heads into the close of the year with fresh highs possibly coming into view. A softer tone to U.S. economic data this week has fueled rate-cuts bets, pushing Treasury yields down and lifting equity markets. For the week, the S&P 500 added 2.2% while the Nasdaq composite rose 2.4% and the Dow climbed 1.9%.

This extended a rally that has seen the S&P 500 gain over 9% since late October. The index is now up nearly 18% for the year and less than 2% away from its year-high, reached in July. Its record closing level, from January 2022, is some 6% away.

Whether it can reach those levels in coming weeks depends in-part on how convinced investors are that the U.S. economy is on track for a so-called soft landing, where the Fed brings down inflation without badly damaging growth. So far, the economy has proven resilient in the face of tighter monetary policy, though some measures of employment and consumer demand have softened.

Leading global investors expect inflation and interest rates to remain high well into next year and are bracing for more volatile sharemarkets where easy returns will be hard to find.

Top fund managers, company founders and superannuation funds told the Sohn Hearts & Minds event at the Sydney Opera House on Friday that they were looking beyond big name, overpriced Wall Street stocks that would struggle to deliver growth.

Instead, investors willing to gamble on unloved and unpopular stocks would do best, they said. Many investors warn there is a huge insolvency risk lurking in private markets.

http://www.martinnorth.com/

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

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
When Hype And Reality Collide....
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Markets Muddle Higher As Yet Another US Credit Rating Agency Goes Negative!

Its been another crazy week on the markets, with a still-jittery bond market clouding the outlook for a rally in U.S. stocks.

Stocks and bonds have been in a tight relationship over the last few months, with the S&P 500 index surging nearly 7% in the last 10 sessions while the benchmark 10-year Treasury yield has tumbled from a 16-year high to 4.657. Helping market sentiment on Friday was a steadier US Treasury market.

After yields tumbled on Wednesday and surged on Thursday, they were little changed on Friday. The yield on the 10-year was 3 basis points higher in a late move, after having been little changed most of the session. Oil also steadied after a bout of volatility with Brent retaking the $US80 a barrel level. Gold was lower with the futures sitting at 1942.60, down 1.38% on the day, while Iron ore extended its rally, pressing through $US128 a tonne in Singapore.

At the same time, the Cboe Volatility Index,, which measures expectations for stock gyrations, has fallen to a seven-week low of 14.17. While such a retreat in Wall Street’s “fear gauge” would normally be a green light for stocks, there’s a catch: it has not been reflected in the most closely watched measure of Treasury volatility expectations, the MOVE index, which remains near its recent high.

Plus, Moody’s on Friday lowered its outlook on the U.S. credit rating to “negative” from “stable” citing large fiscal deficits and a decline in debt affordability, a move that drew immediate criticism from President Joe Biden’s administration. The move follows a rating downgrade of the sovereign by another ratings agency, Fitch, this year, which came after months of political brinkmanship around the U.S. debt ceiling.

Bargain hunters are swirling around beaten-down shares of U.S. banks, even as skeptical investors say the sector’s problems are likely to persist for some time. The S&P 500 bank index is down around 11% in 2023, a year that began with the failure of Silicon Valley Bank and several other lenders in the worst banking crisis since 2008. The broader S&P 500, by contrast, is up around 15%.

Bank stocks are at an all-time low compared with the S&P 500 based on relative prices, according to data from BofA Global Research. That tumble has made their valuations attractive to some investors: the sector trades at eight times forward earnings, less than half of the 19.7 valuation of the S&P 500.

http://www.martinnorth.com/

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

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Markets Muddle Higher As Yet Another US Credit Rating Agency Goes Negative!
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Markets Muddle Higher As Yet Another US Credit Rating Agency Goes Negative!

Its been another crazy week on the markets, with a still-jittery bond market clouding the outlook for a rally in U.S. stocks.

Stocks and bonds have been in a tight relationship over the last few months, with the S&P 500 index surging nearly 7% in the last 10 sessions while the benchmark 10-year Treasury yield has tumbled from a 16-year high to 4.657. Helping market sentiment on Friday was a steadier US Treasury market.

After yields tumbled on Wednesday and surged on Thursday, they were little changed on Friday. The yield on the 10-year was 3 basis points higher in a late move, after having been little changed most of the session. Oil also steadied after a bout of volatility with Brent retaking the $US80 a barrel level. Gold was lower with the futures sitting at 1942.60, down 1.38% on the day, while Iron ore extended its rally, pressing through $US128 a tonne in Singapore.

At the same time, the Cboe Volatility Index,, which measures expectations for stock gyrations, has fallen to a seven-week low of 14.17. While such a retreat in Wall Street’s “fear gauge” would normally be a green light for stocks, there’s a catch: it has not been reflected in the most closely watched measure of Treasury volatility expectations, the MOVE index, which remains near its recent high.

Plus, Moody’s on Friday lowered its outlook on the U.S. credit rating to “negative” from “stable” citing large fiscal deficits and a decline in debt affordability, a move that drew immediate criticism from President Joe Biden’s administration. The move follows a rating downgrade of the sovereign by another ratings agency, Fitch, this year, which came after months of political brinkmanship around the U.S. debt ceiling.

Bargain hunters are swirling around beaten-down shares of U.S. banks, even as skeptical investors say the sector’s problems are likely to persist for some time. The S&P 500 bank index is down around 11% in 2023, a year that began with the failure of Silicon Valley Bank and several other lenders in the worst banking crisis since 2008. The broader S&P 500, by contrast, is up around 15%.

Bank stocks are at an all-time low compared with the S&P 500 based on relative prices, according to data from BofA Global Research. That tumble has made their valuations attractive to some investors: the sector trades at eight times forward earnings, less than half of the 19.7 valuation of the S&P 500.

http://www.martinnorth.com/

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

Let’s Swing Some More…

As we move into November, global stock indexes swung sharply as the U.S. dollar dropped to a six-week low and benchmark 10-year U.S. Treasury yields fell to five-week lows on Friday.

The catalyst was data showed U.S. job growth slowed more than expected in October with some seeing this as meaning the Federal Reserve may be done hiking interest rates. We will see.

The Fed, Bank of England, Canada and other Central Banks have all held rates, in recent times, while continuing to underscore the drive towards their inflation targets will mean rates stay higher for longer.

U.S. two-year yields were the lowest since early September after U.S. job growth slowed in part as strikes by the United Auto Workers union against Detroit’s “Big Three” carmakers depressed manufacturing payrolls. The data also showed the increase in annual wages was the smallest in nearly 2-1/2 years, pointing to an easing in labor market conditions.

The U.S. dollar index dropped to a six-week low after the jobs data. In afternoon trading, the dollar index fell 1%, with the euro up 1.04% to $1.0730.
“The good news here is that the slowdown will likely keep the Fed on the sidelines going forward,” said Brad McMillan, chief investment officer for Commonwealth Financial Network in Waltham, Massachusetts. “One of their key concerns has been an overheated economy, especially after last quarter’s GDP growth, and this suggests that problem is going away.”

http://www.martinnorth.com/

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

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Let’s Swing Some More...
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