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Weekly Market Update (March 03, 2024)


HIGHLIGHTS

Equities were flat this week. The inflation indicators are suggesting a patient approach to lower interest rates. After the in-line PCE data was reported, the lower quality part of the market outperformed as value stocks and the most shorted stocks caught bids.


January Effect: The core personal consumption expenditures (PCE) price index is in line with expectations. However, other inflation gauges like the consumer price index (CPI) were strong. Historically in January data, the strength reflected the price increase at the start of the year for labor-reliant industries like daycare, medical services, car repairs and insurance. Data in the coming months is expected to decline.


Crypto: Bitcoin jumped almost 20% this week, reaching $63k again since 2021. The open interest for crypto options also hit an all-time high. Many traders are rushing to buy short-dated calls while the number of puts is also increasing.


BoJ: The Bank of Japan (BoJ) signaled that the negative interest rate policy will come to an end soon. The official commented that the price target is coming into sight despite the uncertain economy. It helped to boost the government bond yield and yen.

 
MARKETS

Nasdaq

16,274.94

+1.74%

S&P 500

5,137.08

+0.95%

Dow

39,087.38

-0.11%

10-Year

4.18%

-8bps

Brent

83.55

+2.23%

DXY

103.86

-0.10%

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

 
VIEW FROM THE STREET

Equity

Goldman Sachs: The cost of capital (WACC) is high and investors focus more on margins than growth. It is a major headwind for small-cap stocks. Quality stocks are overpriced and will likely underperform when the sentiment in the inflation improves.


Morgan Stanley: Non-US stocks’ dividend yields are averaging 3%. With the catalysts like elections, favorable fiscal policy, and the potential central bank accommodation in various regions, it is a good time to consider diversifying globally.

Fixed Income

Morgan Stanley: As the outstanding T-bills and money market fund assets are almost the same today, this year's excess Treasury issuance would be mostly long bonds.


J.P. Morgan: The current bond yields offer a great entry-level to add duration and income as the Fed is expected to cut rates this year. Bond markets are repricing and in line with policy expectations, with the 10Y yield hovering around 4%.


Economy

UBS: Although the payroll data in January was up high, we believe the underlying trend in labor market will move downward. Wage growth and job openings are supporting the cool-off of labor market.


Barclays: Other than the Fed, we expect the ECB and BoE will wait until June to cut rates. Fed speakers reiterated that they are not in a rush to cut. Data in the eurozone also pointed to a weak recovery from a low base. In the UK, we expect little fiscal headroom to be used for income or tax cuts, which will not significantly impact the inflation outlook.

 
KNOWLEDGE TRANSFER

GLP-1

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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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