Stock markets are continuing their gains after the Federal Reserve confirmed bets that it will soon move to looser monetary policy, pushing stock market indices towards all-time highs and the S&P 500 to its seventh consecutive weekly gain. In Europe, the Stoxx 600 Index reached its highest level since January 2022 and was on track for a fifth week of gains – despite clear signs of economic weakness and small company stocks looking back on a mediocre year.
The US Federal Reserve sparked a wave of speculation this week when it confirmed suggestions that it is ready to declare inflation beaten and cut interest rates – all while the US economy still appears very healthy. No one would have expected these markets this year – it's a miracle. But how long can this rally last?
The market will start 2024 with mega optimism – this is the exact opposite of how the markets started 2023 – with one of the most pessimistic sentiments in history. The shift in the markets is simply astonishing.
The NY Empire State Manufacturing Index for December released today (-14.5 vs. 9.1) could be a early but strong signal of a further (delayed) slowdown in the US economy. The European purchasing managers' indices remain weak, although the figures from China have been surprisingly good.
For today, I expect Fed pivot optimism to remain – and probably next week too (when volatility and trading volumes are already low) – but if the market is full of greed, there is a greater risk of a reversal. I expect the gains holding for a bit longer as hopes for quick rate cuts further increased.
The hawkish statements from the ECB and the Bank of England also remain a risk and a conundrum – especially given the strong signs of economic weakness in Europe.
In the last two sessions, the USD has overreacted somewhat and yields have also plunged. We expect the markets to calm down somewhat today. We see markets generally moving in the opposite direction today – including equities, with more growth stocks being bought today. However, value stocks that are performing well are able to hold onto most of their gains, although we are seeing a slight rotation back to yesterday's losers.
We are still LONG in the Nasdaq 100 – our DAX position has already reached the TP. In this market, it is important not to panic and instead follow the fundamentals.
👁 ROB'S MARKET OVERVIEW:
December 15, 2023
🌐/🇺🇸 Global/US Markets ↕️/↗️
Cyclical Stocks ↕️/↗️
Tech/Growth Stocks ↗️
Financial Stocks ↘️/➡️/↗️
Defensive Stocks ➡️/↘️
Energy Stocks ➡️/↘️
Materials Stocks ↗️
JPY, CHF ↗️
EUR, GBP ↘️ (with investors disregarding hawkish comments from ECB and BoE)
⚡️Cryptos ↕️ (slight headwinds on USD recovery, but remains bullish)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)