It seems we have once again predicted the trend reversal with near-perfect accuracy. According to data from Citi, the market is now net-short the S&P 500 overall after a strong performance this year and an impressive rally over the past four weeks that pushed valuations very high – into overbought territory.
European stocks fell for a second day and US futures are again pointing to a weaker opening on Wall Street as signs mount that the November rally in equity markets is over. The broad European Stoxx 600 fell by up to 0.7% – the S&P 500 is trading 0.3% lower in pre-market.
French luxury goods giant LVMH led the retreat in European cyclical stocks, while HSBC lowered its price targets for the luxury sector as a whole amid growing signs of a slowdown in discretionary spending not only in Asia but also in Europe and signs of cooling consumer and corporate spending in the US. On a positive note, Chinese e-commerce company PDD Holdings gained more than 15% in pre-market US trading after earnings and revenues came in well above estimates.
The USD remains weakened and will end November with the sharpest one-month losses since November 2022 Government bond yields rose slightly, reversing some of their sharp declines from the previous day.
Expectations that interest rates have peaked, that rate cuts could come as early as the first half of 2024 and that the US economy will avoid a recession have boosted equities and government bonds strongly this month. Despite increasing signs of a weakening economy, we have seen one of the strongest November performances in the history of the S&P 500.
Voices from central bank officials around the world, such as the Fed, ECB, BoE and RBA, warn that the monetary policy outlook remains uncertain and that it is too early to say that the battle against high inflation has been won. While we see clear signs of disinflation (partly due to falling consumption/demand) and I do not expect the major central banks such as the Fed and ECB to raise rates further, optimism that rate cuts will come quickly in 2024 remains too optimistic.
Oil traders fell into a short-term bull trap and bought the dip in the hope that possible production cuts by OPEC+ would help oil prices to rise again. However, after initial price gains, there was heavy selling of oil again – although this has now also led to short-term stabilization. The continued overall decline in oil prices remains a warning for investors who still believe that the economy is already in recovery mode. Poor economic data from China and Europe speak a different language and the latest data from the USA also point to an economic slowdown.
Overall, we continue to see low volatility and subdued trading volumes. The market is gradually following our analysis and will see more profit-taking.
The gold price has hardly changed and is close to its highest level since May. As yields are stabilizing, I do not expect a very strong rise in the gold price today – but gold remains attractive. Safe havens, which include bonds, are likely to remain attractive as there are growing signs that the short-term gains of equities are increasingly limited.
👁 ROB'S MARKET OVERVIEW:
November 28, 2023
🌐/🇺🇸 Global/US Markets ↘️/➡️/↘️ (sideways movement with more profit taking in second half of US trading)
Cyclical Stocks ➡️/↘️
Tech/Growth Stocks ↘️/➡️/↘️
Financial Stocks ➡️
Defensive Stocks ➡️
Energy Stocks ➡️ (with slight upside potential as oil prices will see slight tailwinds towards Thursday)
Materials Stocks ↘️
💱 Forex
AUD ↗️/➡️
GBP, EUR, JPY ➡️/↗️
CAD, CHF ➡️
USD ➡️/↘️ (mostly sideways, but remains in normalization)
⚒ Commodity Markets ↕️
Oil prices ↘️/↕️ (ongoing spikes and profit taking – but likely turning slightly bullish at end of the day / tomorrow ahead of OPEC+ meeting)
Natural Gas prices ↘️
Metal prices ↕️
Gold ➡️/↗️ (remains overall bullish – may move into $2,020 – $2,025 but strong gains limited for today as yields likely stabilize)
⚡️Cryptos ↕️/↗️ (remain mostly in sideways but the outlook remains bullish with investors expecting BTC to soon rise above $40K)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)
Your Robert
