top of page

Weekly Market Update (June 11, 2023)



HIGHLIGHTS

Nasdaq and S&P increased slightly this week. The VIX dropped below 15 for the first time in three years. Central banks like RBA and BoC surprised the markets this week with unexpected hikes. The Fed is likely to pause at its meeting next week.


FOMC: Most market participants are expecting a pause as market is pricing only 33% of a 25bps hike. It is because there is still uncertainty about the lagged effect of the previous rate hikes and the impact of tighter lending conditions. Market is pricing a 50% chance of a hike in July’s meeting.


Central Bankers: Central banks have more room to hike rates to control inflation as the global growth risks are declining. Reserve Bank of Australia (RBA) and Bank of Canada (BoC) both delivered a surprising 25bps hike this week. Market is predicting 3 more hikes by RBA and 1 more hike by BoC.


Sluggish Growth: Exports in China dropped due to the weakening global demand. Overseas shipments dropped more than expected (-7.5% actual vs -1.8% expected). The economic growth in China is cooling down, indicated by the near-zero inflation. The major Chinese banks cut their deposit rates to help stimulate the economy.

 
MARKETS

Nasdaq

13,259.14

+0.14%

S&P 500

4,298.86

+0.39%

Dow

33,876.78

+0.34%

10-Year

3.75%

+6bps

Brent

74.99

-1.50%

DXY

103.55

-0.45%

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

 
VIEW FROM THE STREET

Equity

Goldman Sachs: If inflation continues to soften and economic data remains resilient, the equity risk premium will decline. Thus, it will offset higher real interest rates and support current multiples.


Morgan Stanley: The market structure is becoming more fragile due to the high concentration and lack of diversification in the main stock indices. Investors are suggested to add more non-US positions to diversify the risks, such as Japan.

Fixed Income

UBS: As the rate is expected to peak soon, investors are suggested to lock in higher yields in the fixed-income markets. High-quality medium to long-term bonds are preferred. Their yields are still attractive, plus the potential for capital gains if there is a worse-than-expected economic downturn.


Blackrock: Short-term government bonds are preferred over long-term. While long-term government bonds have shielded portfolios from recessions historically, this time may not be the same. Central banks are not likely to rescue the market with rate cuts that they engineered to bring inflation down to their target.


Economy

Goldman Sachs: Compared with the 65% consensus, we see the recession probability in 12 months is 25% due to the resilient data in spending and labor market. Our views on the Fed in next two years remain more hawkish than the current market pricing because of the lower likelihood of recession and higher bar for rate cuts.


J.P. Morgan: The recent data supports the Fed to pause hike at the coming meeting as it is waiting for a clear signal from job market. Spikes in unemployment usually came after the beginning of rate hike with a lag. However, the labor tightness caused by pandemic recovery may help to avoid a sudden drop in labor market.

 
KNOWLEDGE TRANSFER

Spirit & JetBlue Merger

Here's all you need to know about the major airline merger deal.


Elon Musk's Twitter

Here's all you need to know about the $44b Twitter deal.


London Metal Exchange

Here's all you need to know about the LME´s nickel lawsuit.


LUNA

Confused about what happened to UST and LUNA? Here's all you need to know about the event!


 
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.



Comments


bottom of page