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Weekly Market Update (January 21, 2024)


HIGHLIGHTS

S&P500 is near all-time high. 10Y treasury yield went up this week, mainly driven by the higher-than-expected retail sales data and consumer sentiment. A Fed governor mentioned that he does not expect a rate cut until Q3, lowered the market expectation for a March cut from 80% to 55%.


Caucus: Markets are shifting their focus to the implications of the election, including geopolitics, monetary policy, tax, regulation, fiscal stance, trade and tariffs.


ECB: The headline inflation in the eurozone is increasing (2.9% December vs 2.4% November). With the persistent geopolitical risks, a near-term rate cut may be too aggressive to achieve their 2% inflation target.


Taiwan: The presidential election of Taiwan remained in the spotlight. Taiwan Semiconductor Manufacturing Company (TSMC) beat earning expectations and raised revenue guidance. Combining the positive report and favorable election result, the stock price went up 13.5% this week.

 
MARKETS

Nasdaq

15,310.97

+2.26%

S&P 500

4,839.81

+1.17%

Dow

37,863.80

+0.72%

10-Year

4.15%

+20bps

Brent

78.56

+0.34%

DXY

103.29

+0.87%

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

 
VIEW FROM THE STREET

Equity

Goldman Sachs: As the borrowing costs are expected to drop, the return on equity will likely expand, driven by the margin improvement. Investors are expected to shift from high-profitability stocks to high-potential stocks.


Standard Chartered: More than 80% of the S&P500 firms that have reported earnings beat expectations. Sectors like tech and communication services will be the focus as they are the keys to the US equities in the near term.

Fixed Income

UBS: The lower interest rate will decrease the returns and increase the reinvestment risks of the cash and money market. We suggest investors shift away from the cash and toward stocks and bonds.


Morgan Stanley: Due to the Fed policy pivot, the growth rate of bankruptcy filings has eased. However, slower-than-expected rate cuts may put upward pressure on default rates, which will affect high-yield fixed-income assets.


Economy

Barclays: The increasing risks of premature rate cuts are pushing back against the market pricing. Markets believe that ECB and BoJ are unlikely to adjust their policy.


UBS: Investors are recommended to disassociate investment decisions from politics. Although the US election may increase the speculation that the rate cut cycle would start sooner, there is no historical record that the election had a significant impact on the market.

 
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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