The global sell-off in risk assets continues as investors and analysts adjust their projections after the Fed's higher-for-longer stance amid recurring inflation concerns and continued signs of a robust U.S. economy.
U.S. Treasury yields rose sharply, with 10-year bond yields rising more than 12 basis points (!) to a new 2023 (15-year+) high. USD strength returned rapidly after investors had recently started selling the USD because they had positioned it incorrectly. Now the USD is back to its strongest level since March and is rising against all other currencies. The JPY managed to withstand further sharp losses as analysts expect the Bank of Japan to soon give more hints about normalizing monetary policy as the USD/JPY has been approaching the 150 level again.
GBP fell after the Bank of England left interest rates unchanged for the first time in almost two years – however, unlike the ECB, the BoE stated that it is ready to raise rates further if needed.
The U.S. labor market shows no more signs of easing, with claims for U.S. unemployment benefits reaching their lowest level since January last week, according to data just released. The strong labor market reinforces the image of a very resilient U.S. economy that can withstand high interest rates for an extended period of time (or even higher interest rates).
Voices are being raised among Fed officials that the Fed needs to raise rates further. The dot plot released yesterday points to another Fed rate hike before the end of the year and a very small change in rates by the end of 2024.
Asian markets also saw further selling, with Chinese equities continuing their poor performance. We see global equities significantly lower and growth stocks in particular under pressure as yields rise and expectations for rate cuts in 2024 begin to fade. We continue to see a rotation from growth to more defensive sectors – although today's sell-off is likely to remain broad-based for now (albeit with more losses in interest rate sensitive stocks). After recent losses, the energy sector may be the only sector to close higher today as oil and gas prices stabilize and the outlook remains positive.
Commodity prices, especially gold, came under pressure from the strong USD (and surging yields). Oil has found a bottom and remains bullish meaning that additional price pressure due to elevated energy prices remain.
👁 ROB'S MARKET OVERVIEW:
September 21, 2023
🇺🇸 US Markets ↘️
Cyclical Stocks ↘️
Tech/Growth Stocks ↘️
Financial Stocks ↘️
Defensive Stocks ➡️/↘️
Energy Stocks ➡️/↗️
Materials Stocks ↘️
EUR ➡️/↗️ (benefiting from GBP weakness)
GBP, AUD ↘️
⚒ Commodity Markets ↕️
Oil prices ↕️/↗️
Natural Gas prices ↕️
Metal prices ↘️ (under pressure strong USD)
Precious Metal prices ↘️ (heavily under pressure from skyrocketing yields & strong USD)
⚡️Cryptos ↕️/↘️ (heavily under pressure from skyrocketing yields & strong USD)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)