Morning Brew January 24 2022
Senior Relationship Manager
Summary: Sell the Rumor buy the fact?
Nervousness got into the markets into the close of last week with fears about growth, inflation, rising rates and a possible escalation in the Ukraine conflict worsen.
Stocks sold off, Volatility is back in the game at 28%. Bitcoin crashes, over the weekend with lows near 30k to stabilize to 35k.
For the Week, US Indexes lost severely, the Dow lost 4.6% the S&P 500 fell 5.7% and the Nasdaq lost 7.6% Over night we see a slight recovery with futures up 0.8%. Volumes on US Exchanges was huge with 40% more shares being traded than on average. Global Stocks lost 4.2 Trillion last week acc to Bloomberg and the a chart of the ARK Innovation ETF relative to Berkshire Hathaway went viral showing worth are now at the same performance since early 2020 – Implying that Growth has no longer outperformed value. Elon Musk lost 25 bio in net worth and Jeff Bezos 20 in the week. The QQQ ETF traded 50 bio in Volume on Friday.
Earnings and the FOMC will be key but there are also lots of data points with potential to move the markets, such as Apple and Tesla earnings. 14000 is a key support in the Nasdaq, Dax around 1500
It may be tone for a pause in the sell off if there are no further bad news, in a sell the rumor buy the fact move. As this week has lots of potential for volatility, as I list below, consider looking look at optionality when taking on risk.
After a strong week, Gold is trading at 1838, above the key resistance at 1835, the weekly close was on that level. Silver is trading at 24.15. Gold ETF holdings rose the most in 18 months
There was relatively little move in the USD Index, it is at 95.80, 10 year yields at 1.76, EURUSD in back in Midrange between 1.12 and 1.14 after the breakout higher failed, GBPUSD is trading at 1.3540.
Oil had a strong week and broke above the 85.40 level (CL) and the 2021 high. That level needs to hold for further upside.
The top U.S. and Russian diplomats made no major breakthrough at talks on Ukraine on Friday and the US is asking Diplomats families to leave Ukraine. Taiwan reported a large incursion by China's air force in its air defense zone.
Renault SA, Nissan Motor Co and Mitsubishi Motors Corp plan to triple their investment to jointly develop electric vehicles acc to Reuters.
Key Economic Data:
Monday: International PMIs 9:15 France, 9:30 Germany, 10:00 EU, 10:30 UK. 15:45 US
Tuesday: German IFO, Case Shiller, Consumer Confidence
Wednesday: Canada Rate decision, US Rate decision
Thursday: US Durable Goods orders and GDP
Friday: Swiss KOF, EU Business Climate, Personal Income, US PCE, University of Michigan Consumer Confidence.
Tuesday: Texas Instruments, Johnson & Johnson, Verizon, American Express, Microsoft., NextEra, Raytheon, General Electric, Lockheed Martin
Wednesday: Christian Dior, Boeing, Anthem, , Tesla, Intel, Abbott Laboratories, AT&T,
Thursday: Diageo, Danaher, Apple, Visa, LVMH, Mastercard, Comcast, McDonald's, SAP SE, Blackstone,
Friday: Charter Communications, Chevron Caterpillar
Latest Market Insights
Outrageous Predictions 2023: The War Economy
- The constantly growing global need for energy drives the world's richest to huddle up and launch a R&D project in a size the world hasn't seen since the Manhattan Project gave the US the first atomic bomb.
French President Macron resignsThe political stalemate in France and the rise of Marie Le Pen following the 2022 elections corners President Macron, forcing him to give up on politics and resign from his position. At least for now.
Gold rockets to USD 3,000 as central banks fail on inflation mandateAs markets and central banks realise that the idea that inflation is transitory is wrong, and that prices will remain higher for longer, gold is sent through the roof, hitting a price tag of USD 3,000
EU Army forces EU down path to full unionWith continued challenges in the region and a US military that isn't aggressively enacting its former role as global policeman, the European Union agrees to create its own armed forces, bringing the whole region closer.
A country agrees to ban all meat production by 2030In an effort to become one of the global leaders on the path to net-zero emissions, one country decides to not only put a heavy tax on meat, but to ban domestic production entirely.
UK holds UnBrexit referendumFollowing a recession and domestic pressure, the United Kingdom is thrown into political turmoil that will end with a vote to wind back Brexit.
Widespread price controls are introduced to cap official inflationHistory tells us that with the war economy comes rationing and price controls. And this time is no different, as policymakers introduce strict price controls that lead to a range of unintended consequences.
OPEC+ & Chindia walk out of the IMF, agree to trade with new reserve assetSanctions against Russia have caused widespread turmoil due to US Dollar moves in countries across the globe that don't consider the US an ally. To relieve themselves from this, they leave the IMF and create a new reserve asset.
USDJPY fixed to the USD at 200 as Japan overhauls financial systemFollowing the challenges that faced the Japanese Yen in 2022, the Bank of Japan attempts to keep the currency from sliding. Unsuccessful on the long-term, Japan will launch a reset of its entire financial system.
Tax haven ban kills private equityWith the war economy comes an increased focus on national interests and sovereign nations' ability to assert themselves. In that regard, the OECD countries turn their attention on tax havens and pull the big guns out, banning them altogether.