The Long and Short of it, week ending 05 Jan 2024
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Stock markets moved lower last week with all 3 major indexes losing ½ percent or more. The Nasdaq Composite Index fared the worst, sharply underperforming both the S&P 500 Index and the Dow Jones Industrial Average. The underperformance stemmed from weak tech stock performance with Apple share prices, for example, falling nearly 6% on the week following downgrades by analysts. The broader move lower, however, resulted from renewed concerns regarding the timing and extent of Fed rate cuts this year. Rate cut expectations may have been scaled back, driving longer-term Treasury rates higher, strengthening the U.S. dollar and precipitating some risk-off sentiment. Economic data released last week contributed to these renewed concerns with a stronger-thanexpected payroll report (Friday) and lower-than-expected jobless claims (Thursday). Friday’s weaker-thanexpected ISM Non-Manufacturing PMI seemed to slightly diminish those same concerns, perhaps helping stock markets rise slightly on Friday. For the week, the S&P 500 Index fell 1.5% to 4,697.24, the Nasdaq Composite Index dropped 3.3% to 14,527.07, the Dow Jones Industrial Average decreased 0.6% to 37,466.11, the 10-year U.S. Treasury rate rose 18bps to 4.05% and the U.S. dollar (as measured by the ICE U.S. Dollar index – DXY) strengthened 1.1%.
European markets moved lower as well last week but to a lesser extent compared to U.S. markets. Higher-thanexpected euro zone inflation seemed to offset weaker-than-expected euro zone manufacturing activity and a larger-than-expected decline in German retails sales, diminishing ECB rate-cut expectations and pressuring stock prices and the STOXX 600 Index lower. In the UK, mixed economic data (better-than-expected construction and services PMIs and Halifax House Price Index along with weaker-than-expected manufacturing PMI and retail sales) seemed to raise doubts about BoE rate-cut timing. For the week, the FTSE 100 Index decreased 0.6% to 7,689.61, the STOXX 600 Index fell 0.6% to 476.38, the 10-year Gilt rate climbed 25bps to 3.79%, the 10-year Bund rate rose 11bps to 2.14% and the British pound and euro weakened 0.1% and 0.9%, respectively, versus the U.S. dollar.
Top performing ETPs over the week
| . | 3x Long ETPs | 3x Short ETPs | ||
|---|---|---|---|---|
| UK | 3x BAE Systems (3LBA) | +11.4% | 3x Diageo (3SDO) | +10.1% |
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The Long and Short of it, week ending 05 Jan 2024
