The Long and Short of it, week ending 01 Sep 2023
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All 3 major indexes moved higher last week, powered mainly by investor reassessment of the strength of the economy and, as a result, of a possible relaxing of the Fed’s current monetary policy. Weaker-than-expected JOLTS and consumer confidence releases early last week seemingly accentuated Fed Chair Powell’s “proceed with caution” Jackson Hole comments, increasing expectations of a less aggressive Fed, pushing Treasury rates lower and stock prices higher. More (but less) of the same followed with an unexpected revision lower to Q2 GDP. Thursday’s PCE Price Index release, while generally reflecting a slowing in core and headline inflation, also showed continued higher-than-desired (by the Fed) wage and services inflation, increasing (at least momentarily) uncertainty regarding the Fed’s future course of action. Friday’s weaker-than-expected Jobs Report, also seemingly increased uncertainty with lower-than-expected jobs created offset by slightly higher-than-expected wage growth. 10-year Treasury rates, down 13bps through Thursday, rose 8bps Friday (following the Jobs Report), finishing the week 5bps lower. The move lower was entirely due to falling 10-year inflation expectations. For the week, the S&P 500 Index increased 2.5% to 4,515.77, the Nasdaq Composite Index climbed 3.3% to 14,031.82, the Dow Jones Industrial Average rose 1.4% to 34,838.01, the 10-year U.S. Treasury rate decreased 5bps to 4.18% and the U.S. dollar (as measured by the ICE U.S. Dollar index – DXY) strengthened 0.2%.
European stock indexes moved higher as well last week. China’s measures to support its stock and property markets pushed both the STOXX 600 and FTSE 100 Indexes higher throughout the week, benefiting the performance of luxury, energy and mining stocks. Slightly better-than-expected inflation numbers out of Germany and the euro zone in general also supported index levels, lowering expectations of ECB peak-rate levels, pushing euro zone yields lower and stock prices higher. Continued manufacturing weakness in Germany, France and Italy added to hopes of ECB moderation, moving stock prices higher as well. For the week, the STOXX 600 Index increased 1.5% to 458.13, the FTSE 100 Index rose 1.7% to 7,464.54, the 10-year Gilt and Bund rates fell 1bps to 4.43% and 2.55%, respectively, the British pound strengthened 0.1% and the euro weakened 0.3%, both versus the U.S. dollar.
Top performing ETPs over the week
| . | 3x Long ETPs | 3x Short ETPs | ||
|---|---|---|---|---|
| UK | +3x Rolls-Royce (3LRR) | +24.1% | -3x Diageo (3SDO) | +6.2% |
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The Long and Short of it, week ending 01 Sep 2023
