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Weekly Market Update (January 28, 2024)


HIGHLIGHTS

S&P500 hit all-time high this week. Around one-fourth of S&P500 companies reported earnings this week. Q4 GDP in the US came in higher than expected (3.3% actual vs 2% expected). With the rebound in jobless claims, supporting soft-landing scenario.


Treasury: The US 10Y treasury yield increased this week, mainly driven by the increasing purchasing manager index and weaker 5Y treasury auction. Fed is expected to keep interest rate unchanged in the next meeting while the expectation of a rate cut in March dropped to 50%.


Chinese Stocks: All eyes are on the stimulus in China, in which the reserve requirement was cut by 50bps. It is a strong signal that officials are willing to support the economy, the weak market demand and real estate market. US-listed Chinese stocks jumped this week.


US Election: The primary win in New Hampshire further increased Donald Trump’s chances of becoming the presidential nominee of Republican. Markets predict the win of Republicans could strengthen the dollar, leading to higher breakeven inflation, yields and tariff.

 
MARKETS

Nasdaq

15,455.36

+0.94%

S&P 500

4,890.97

+1.06%

Dow

38,109.43

+0.65%

10-Year

4.16%

+1bps

Brent

83.83

+6.71%

DXY

103.47

+0.17%

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

 
VIEW FROM THE STREET

Equity

Morgan Stanley: We expect equity market would be range-bound as the earning forecast is ambitious and forward multiples are at historic peaks. Also, the better earnings are met with lower multiples characteristic of a midcycle.


Goldman Sachs: Typically, the returns in S&P500 have been positive before yield curve normalization. If the economy does not enter a recession, equities usually continue to increase after un-inversion of yield curve.

Fixed Income

UBS: As the Fed officials were discussing when to slow down the pace of bond-selling at the latest meeting, the upward pressure on real rates dropped and we expect the next leg lower in yields is likely to be led by long-term real rates.


Morgan Stanley: Historically, the steepening of yield curve from a deep inversion is a key feature of a new cycle, usually coinciding with recession and rate cuts. Although the length of inversion is long this time, we do not expect an imminent cut as the economy is not pressuring cuts.


Economy

Barclays: We expect a limited slowdown in the economy as the momentum remains robust. Inflation continues to ease globally, which probably signals rate cuts to come in the coming Fed and Bank of England meetings.


UBS: With the downward revisions to prior months and high-than-expected first-time claims for jobless benefits indicated a weaker labor demand. With the moderating inflation, resilient growth and prospect of rate cuts, we expect the Fed to start cutting rates in May.

 
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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