Market Synopsis: Equities up, Treasury Yields down, Commodities up, Dollar down, Crypto up
Past Week Event(s):
-Jerome Powell, the chair of the Federal Reserve, spoke on Wednesday. He carries much of the responsibility in determining monetary policy which in turn affects markets. Markets rallied after hearing Powell’s speech. The speech was dovish with a hawkish undertone. Powell explained it may be time to slow rate hikes, but to prevent all out euphoria mentioned that the cutting of rates is a premature subject matter.
- A strong jobs report disappointed markets sending the S&P tumbling. 263,000 new jobs were added in the month of november despite the Federal Reserve tight monetary policy. This report spooked markets as a strong labor market is not what the Federal Reserve wants to see, therefore, fears of an aggressive Federal Reserve were stirred once again. However, markets recovered much of these losses recalling Powells message on Wednesday.
- “Ugly” economic data was also a component of this week. Chicago PMI or Purchasing Managers Index tracks is an important economic indicator which serves as a measure of the manufacturing and service sectors. The poor results which came out of this report could potentially indicate a recession.
Next Week (December 5):
- Producer price index final demand will be released next week. This data point measures the change in prices from producers. This is an important indicator of inflation, because producers raise prices in order to keep up with inflation. Investors will be on the lookout.
- UMich consumer sentiment index is a survey that asks how people feel about their financial situation, their spending habits, and about the economy in general. This illustrates how inflation has been affecting consumers.
Market Snapshot:
- Markets had a messy and interesting week. International headlines coming out of China regarding the recent protests have shocked the world and raised concerns in markets. Possibility of OPEC(The Organization of the Petroleum Exporting Countries) production cuts stirred the pot even more. Furthermore, Powell gave a critical speech on Wednesday where he spoke dovishly with a hawkish undertone. The possibility of a soft Fed Pivot meaning a slow down of rates sparked a nice rally in markets. However, economic data like PMI and the jobs report brought back investors to the harsh reality markets and the economy is facing.
U.S Equities:
- Indexes(Week)
- SPX 4,071.70(1.13%), DJIA 34,429.88(0.24%),
- NASDAQ 11,461.50(2.09%), RUT 1,892.84(1.27%)
Sectors
- Almost all sectors closed the week green. The big winners of the week were Tech, Communications services, Materials, and consumer discretionary all up over 2 percent on the week. Communications services outpaced all rising 3.66 percent on the week. The Financial sector was the odd one out, closing down about a quarter of a percent.
Individual ETF to Note
- JEPI is a fascinating ETFs which could provide more diversification and better risk management to a portfolio. JEPI’s investment thesis is simple as they purchase top S&P 500 companies and sell covered calls. Covered calls are a simple options strategy which involves selling a option call contract against the stock already owned. Essentially, they reduced risk and volatility while also providing income. The downside is that upside potential is capped. This downside is compensated for in an astonishing dividend yield of 10. This is an excellent ETF when the market is experiencing turbulence. However, as the current market environment continues to evolve an investor needs to carefully consider the details of the ETF.
Treasuries:
- Treasuries had a rough and bouncy week. This is in large part due to Jerome Powell’s dovish sentiment on Wednesday. His speech sent yields tumbling. Later in the week, however, bad economic data and a good jobs report sent yields higher. To summarize a potential for a slowdown of rates explained by Powell sent Yields lower but hopes of potentially an aggressive Federal Reserve were re-stimulated on Friday.
Commodities:
- Oil
All commodities ended higher this week benefiting from Powell’s dovish speech and a weakening dollar. Oil was extremely volatile as rumors of production cuts sent prices all over the place. All in all though it ended the week up at 80$.
Gold
- Gold rallied to hit highs not seen since August at about $1800.
- BTC -17,070, 3.40% ETH - 1,292.27, 7.72%
- This week was good for crypto. Most crypto markets performed very well on the week. Bitcoin and Ethereum both closed the week up 3 and 7.5 percent respectively. Since the collapse of FTX the crypto world has been under severe pressure and its future remains in question.
Europe:
Stoxx 600- 443.29, 0.58% DAX -14,529, -0.08% FTSE 100 -7,556, 0.93%
- Chart of the DAX (5-day)
- The markets were generally calm, but oil and gas sectors fell about 1.1% over the past week. This fall followed the new EU agreement to limit Russian oil barrels to a $60 cap. This enactment still needs the ok from 27 EU governments.
Investors across the globe alike have been watching the world cup and the shapeup of the zero-covid policy protests in China. Though not truly proven, many believe an elimination from the world cup has a direct impact on that country’s market performance. This may be something to look out for.
Asia:
XJO (Australia)-7,151, -0.09% Shanghai 180 Index-8,269, 2.06% Nikkei 225- 27,780, -1.98%
- XJO 5-day Chart
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