We see stocks and bonds with a slight correction to start the year as the market has tested optimistic expectations for sharp rate cuts and strong performance in 2024, including 9-week gains for the S&P 500, has not pushed the equity rally too far.
Wall Street is particularly weighed down by Apple, which slipped in pre-market trading after a Barclays analyst warned of a slowdown in iPhone demand. The yield on 10-year US Treasuries rose by almost 10 basis points as demand for bonds cooled. Oil prices also rose again after Iran sent a warship into the Red Sea, putting additional (probably temporary) pressure on growth stocks.
After the very strong gains of late, it is absolutely not unusual to see a slight correction and we are seeing markets hit by Apple in particular, which is currently down almost 2.5% in pre-market trading. I expect a short-term pause in the rally, with optimism only then returning, but overall a difficult quarter for equities as the market has already priced in very optimistic expectations for interest rate cuts.
The markets are also influenced by significant USD gains. We see the USD rising by almost 0.7 % against other currencies. The Yen weakened in thin trading as investors monitored the situation following the earthquake in Japan on Monday. However, the impact remains limited and Japanese markets will remain closed until Thursday. I continue to see the JPY with strong gains in 2024.
Bitcoin climbed above $45,000 for the first time in nearly two years as anticipation builds for the expected US approval for an exchange-traded fund to invest directly in the largest token. Many prominent investors expect bitcoin to rise sharply this year. However, in the short term, current gains have gone a bit far and investors can probably find a better entry point (even below $45K).
The news that semiconductor manufacturer ASML Holding NV has halted shipments of some of its machines to China at the request of US President Joe Biden's administration adds to the pressure on global markets. This shows that the current tensions between the US and China at the beginning of the year show little sign of improvement.
I expect the stronger USD and higher yields to weigh on commodities (including gold) and riskier assets (and currencies) in the short term. Overall, however, it is more likely that the losses in equities will lead to dip buying as more and more investors hope that the strong rally will continue in 2023 – supported by hopes of interest rate cuts.
👁 ROB'S MARKET OVERVIEW:
January 02, 2024
🌐/🇺🇸 Global/US Markets ↘️/➡️
Cyclical Stocks ↘️/➡️
Tech/Growth Stocks ↘️/➡️
Financial Stocks ➡️
Defensive Stocks ↘️/➡️
Energy Stocks ↗️/➡️
Materials Stocks ↘️
USD ↗️ (strong early gains with limited further upside potential for today; but overall remains bullish for now as yields rise)
EUR, CHF ↘️/➡️
GBP, AUD ↘️
⚒ Commodity Markets ↕️
Oil prices ↗️/↕️ (limited upside potential after early strong gains)
Natural Gas prices ↘️
Metal prices ↕️/↘️
Gold ↗️/↘️ (will come under pressure as yields rebound short-term; remains overall bullish)
⚡️Cryptos ↕️/↘️ (will come under pressure as yields rose and after strong gains; remains overall bullish)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)