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Weekly Market Update (March 31, 2024)


HIGHLIGHTS

S&P500 ended the quarter with more than 10% gain, which is its second consecutive quarter with a double-digit gain. Markets are expecting funds to sell equities to rebalance their positions. 10Y treasury yield was up 10bps after the hawkish comments from Fed officials.


Economic Data: Markets expect the core personal consumption expenditures (PCE) index to reach 2.4% by June and remain at that level until the end of this year. US consumer sentiment hit its highest level since 2021. GDP expectation in Q4 has increased.


Bridge Collapse: Baltimore’s Francis Scott Key Bridge has collapsed this week, affecting maritime transit. The ongoing interruptions near the Red Sea and Panama Canal are adding more pressure on the global supply chain. However, economists believe these would only affect inflation modestly as the demand is not strong.


Q1: To wrap up the first quarter, the equity markets are strong and the economy is so resilient that the expectation of rate cuts is diminished. Volatility in different assets is low, given the geopolitical uncertainties. In the coming quarter, the rate cut cycle and the adoption of AI will be the 2 main market drivers.

 
MARKETS

Nasdaq

16,379.46

-0.30%

S&P 500

5,254.35

+0.39%

Dow

39,807.37

+0.84%

10-Year

4.20%

-2bps

Brent

87.48

+2.22%

DXY

104.49

+0.06%

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

 
VIEW FROM THE STREET

Equity

Goldman Sachs: Momentum trades outperformed this year, with a nearly 30% increase year-to-date. However, the worst performers in momentum jumped 4% this week, indicating a reversal.


J.P. Morgan: As interest rate is expected to be higher for longer, investors are recommended to focus on quality stocks instead of growth stocks. Stocks with reliable revenue streams, good cost management and low interest rate exposure would be attractive.

Fixed Income

Morgan Stanley: Although the 10Y benchmark treasury rate went up 50bps since the end of last year, the volatility in rates is dropping, pushing the investment grade (IG) spreads lower. The narrower spread means a better economic condition as markets are willing to buy riskier assets (corporate bonds) instead of risk-free assets (treasury). We recommend IG corporate bonds with 3-5 year duration bonds.


UBS: The higher-than-expected inflation data in the past 2 months are driven by temporary factors such as seasonal price hikes. We expect inflation to drop in the coming months and maintain the view that June would be the right time for rate cut. Investors are recommended to lock in still-elevated yields in quality bonds.

Economy

Morgan Stanley: Low-end consumers are struggling with the high interest rate such as credit card and other interest payments. It will lead to weakness in consumption.


Barclays: In the US, the GDP forecast indicated a resilient economy in the rest of the year, reducing the near-term downside risks in economic activities. In Europe, growth is rebounding with dropping inflation. The recovery will be sustainable if the policymakers implement monetary easing policies.

 
KNOWLEDGE TRANSFER

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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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