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Weekly Market Update (December 03, 2023)



HIGHLIGHTS

In November, S&P500 increased by 8.5%, with VIX dropping to its 4-year low. 10Y treasury yield and the dollar fell significantly. Rate cut speculation is pushed back as Fed Chair Powell claimed that they are prepared to tighten if it is necessary.


Fed Comments: Markets initially took a relief earlier this week, as Fed Governor Christopher Waller mentioned that he is confident that the current policy could get inflation back to target. However, Fed Chair Powell stated that the conclusion is still premature and Fed is prepared to tighten further if it is needed. Markets are pricing in a 40% chance of rate cut in Q1 next year.


Magnificent 7: Investors are looking to diversify from the Magnificent 7, namely Apple, Amazon, Alphabet, Nvidia, Meta, Microsoft and Tesla. They have accounted for 3/4 of the S&P500’s gains year-to-date. The trading flows show that investors are reallocating from mega-tech to other companies in the index.


OPEC+: Investors are skeptical about the voluntary output cuts by OPEC+. The potential risks include the uncertainty of whether the OPEC+’s members will comply and the upside surprise to inventories. Oil prices are down this week, Brent was down 1.6%.

 
MARKETS

Nasdaq

14,305.03

+0.38%

S&P 500

4,594.63

+0.77%

Dow

36,245.50

+2.42%

10-Year

4.23%

-24bps

Brent

78.88

-2.11%

DXY

103.27

-0.13%

*Data as of market close. 5-day change ending on Friday.

 
VIEW FROM THE STREET

Equity

Standard Chartered: After the November rally, US equities have turned neutral. The balanced mutual funds are likely to rebalance from equities to bonds in the coming month due to the sharp rebound in equities last month. The demand for risk assets is weaker overall.


J.P. Morgan: In the coming year, opportunities will broaden beyond the Magnificent 7, driven by the rapidly developing AI industry. Markets continue to provide options for people either to add risk with growth or defensiveness with value.

Fixed Income

Goldman Sachs: Interest rate is lower and credit spreads are tighter, driven by the persistent strength in growth and favorable inflation data. Both investment-grade and high-yield bonds jumped 6.8% and 4.2% respectively.


UBS: We believe interest rate pricing is overshot. Markets are pricing a 42% likelihood of a March rate cut, and 100-125bps of rate cuts by the end of next year. It is too early and too sharp, and we expect a potential 2 or 3 cuts for 2024.


Economy

Barclays: The pace of disinflation is uncertain, as the demand is still robust and labor market is resilient in the US. We believe rate cuts will be delayed until the end of next year.


UBS: The base case for 2024 is soft-landing of decelerating growth and inflation. Fed keeps monitoring the labor market and consumer strength, which are the major drivers of economic activities in the US this year.

 
KNOWLEDGE TRANSFER

ARM IPO

Here's all you need to know about the initial public offering of Arm Holdings.


 
DISCLOSURE

This newsletter is meant for informational purposes only and is not investment advice. Always consult a licensed investment professional before making important investment decisions. Advertising and sponsorship do not influence editorial content or decisions. Market Hedwig is not responsible for the promises made or the quality or reliability of the products or services offered in any advertisement.



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