The Long and Short of it, week ending 14 April 2023

Publication Type: Market Commentaries
The Long and Short of it, week ending 14 April 2023

Stock markets rose last week with value stocks outperforming growth stocks as expectations of further Fed tightening increased as the week progressed. The previous Friday’s robust job report helped boost cyclical/value stock prices while adding to expectations Fed rate hikes would continue through at least May, hurting growth/tech stock prices. This sentiment was reinforced by Wednesday’s CPI release showing cooling-but-still-stubbornly-high inflation with value stock prices benefiting over growth stock prices. FOMC minutes, also released Wednesday, did the same. While Thursday’s lower-than-expected PPI release moved all 3-major indexes higher (with the Nasdaq Composite increasing the most), Friday’s comments from Fed officials calling for higher rates mitigated those moves, sending index levels lower. Changes in Treasury rates reflected growing expectations of more Fed rate hikes with the 10-year Treasury rate increasing 21bps. 10-year real rates were the primary reason for the increase, rising 15bps. The U.S. dollar, weaker 0.8% through Thursday, strengthened 0.6% Friday (following comments from Fed officials). For the week, the S&P 500 Index increased 0.8% to 4,137.64 the Nasdaq Composite Index rose 0.3% to 12,123.46, the Dow Jones Industrial Average gained 1.2% to 33,885.31, the 10-year U.S. Treasury rate increased 21bps to 3.51% and the U.S. dollar (as measured by the ICE U.S. Dollar index – DXY) weakened 0.3%.

European stock indexes moved higher last week, outperforming U.S. counterparts. Buoyed by relatively good economic data, both in the U.S. and Europe, the STOXX 600 and FTSE 100 Indexes climbed almost 2% higher with the STOXX 600 Index closing the week at a 1-year high. Lower-than-expected U.S. CPI and PPI releases, bolstering hopes of a less aggressive Fed, combined with moderating German inflation, encouraging EZ retail sales and industrial output moved European stock prices higher. The indexes also were supported by strong mining and energy stock performance as well as by strong bank (following record JP Morgan profits) and luxury stock performance. 10-year government rates rose sharply last week, reflecting expectations of better-than-expected economic growth and continued central bank rate increases. For the week, both the STOXX 600 and FTSE 100 Indexes rose 1.7%, the 10-year Gilt rate increased 23bps to 3.66%, the 10-year Bund rate increased 25bp to 2.43%, the British pound weakened 0.2% and the euro strengthened 0.7%, both with respect to the U.S. dollar.

Top performing ETPs over the week

. 3x Long ETPs 3x Short ETPs
UK +3x Glencore (3LGL) +23.3 % -3x Diageo (3SDO) +0.7%
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The Long and Short of it, week ending 14 April 2023