Stocks in the US (in pre-market trading) and also global equities are seeing little movement and low trading volume as most investors remained on the sidelines ahead of key US inflation data (tomorrow). Yields on the key 10-year government bonds briefly dipped below 4% again, giving equities some tailwinds, but investors are likely to become more cautious.
We saw more movement in oil and Bitcoin. Following further attacks on ships in the Red Sea, which some fear could affect both oil supplies and trade flows, oil prices rose again in another choppy session. I think the risk is overstated, but any warning gives a tailwind to oil prices, which face headwinds from a fundamental (low demand/oversupply) perspective.
Analysts are optimistic that the December inflation data will show that inflation has continued to fall – thanks in part to lower energy prices in December. I believe there is plenty of room for disappointment and that this data would paint a convincing picture to the Fed that deep rate cuts are the way to go (which swap markets are already pricing in). Another risk factor is a potential slowdown in earnings growth – although I expect banks to start the coming earnings season on a positive note.
The market remains vulnerable as hopes for rate cuts may fall significantly and after we have already seen the previous month's rally become shaky.
Geopolitics remained in focus as China's US envoy said the country has no room for compromise with Taiwan independence advocates.
The JPY faces more headwinds after recent data showed only modest inflation and very slow wage growth today. Although I still expect a strong year for the JPY, weakness will intensify for now – mainly because Fed rate cut optimism remains too high. We are SHORT the JPY and have benefited greatly from the sharp drop in the JPY.
Bitcoin saw some selling, triggered by speculation over the approval of Bitcoin spot ETF funds by the US Securities and Exchange Commission (SEC). The SEC said it had not yet given the green light to the ETFs and that its account on social network X had been “compromised”. While I recommend staying or holding in Bitcoin this year – the Bitcoin ETF approval is already priced in and was also the main reason for Bitcoin's very strong performance in 2023. I don't expect a massive upswing when ETFs are approved and believe investors will be able to get in at a better price. A delay in approval could drop Bitcoin into the $40K – 42K range in the short term.
👁 ROB'S MARKET OVERVIEW:
January 10, 2024
🌐/🇺🇸 Global/US Markets ➡️/↘️ (mostly sideways with some selling in second half of US trading)
Cyclical Stocks ➡️
Tech/Growth Stocks ➡️/↘️
Financial Stocks ↘️/➡️
Defensive Stocks ➡️
Energy Stocks ↗️/➡️
Materials Stocks ↘️
USD, EUR ↗️ (EUR & USD to edge higher as rate cut expectations reduced)
GBP ↗️/➡️ (GBP to edge higher as rate cut expectations reduced)
AUD, CAD ↗️/➡️
JPY ↘️ (remains bearish; BoJ
⚡️Cryptos ↕️ (very volatile – medium/long-term with much more upside potential. ETF approval could result in slight gains – big rally will likely not happen)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)