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Sandeep Rao

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Are Markets Recovering? A Closer Look

Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

News about market movements in financial publications have been rather positive in the year so far. This might lead retail investors to believe that the risk factors for the downside have decreased and its the return of the bull market that lasted nearly 5 years before the pandemic became global (and for a short while after movement restrictions were lifted in kay areas of the Western Hemisphere). However, an enthusiastic return to bullish estimations might be premature.

Mr. Jurrien Timmer, Fidelity’s Director of Global Macro, estimated that in the year till date, margins seem to be bearing the brunt of the earnings estimate downgrades, thus falling from 13.7% to 12.2%. Even present-day valuations are being deemed as being high by historical standards, and well above the pre-COVID peak over the past fifteen years.

Websim is the retail division of Intermonte, the primary intermediary of the Italian stock exchange for institutional investors. Leverage Shares often features in its speculative analysis based on macros/fundamentals. However, the information is published in Italian. To provide better information for our non-Italian investors, we bring to you a quick translation of the analysis they present to Italian retail investors. To ensure rapid delivery, text in the charts will not be translated. The views expressed here are of Websim. Leverage Shares in no way endorses these views. If you are unsure about the suitability of an investment, please seek financial advice. View the original at

Mr. Timmer further elucidated that while US earnings estimates are coming down hard, the rest of the world seems to be stabilizing. In year-over-year change in forward estimates, Emerging Markets (EM) stocks had earlier been at the bottom of the pack and are now flattening out.

This is by no means is a minority opinion. As the article from nearly two weeks ago highlighted, most leading analysts posit that India will lead the pack of EM instruments that will do well in this year.

The deflation of US stock valuation is quite an interesting turn of events. Historically, US equities have been the most overvalued stocks in the world, which was achieved in no small part by strong “brand recall” among investors worldwide due to the large volumes of media output about them. Charles Schwab estimates that the projected returns over the next ten years is showing a bearish tendency with at least some signs of a deflation in the 10-year forecast in the estimates made last year versus the current.

Belying any expectations of a recovery have been the downsizing actions of the US economy. New data gives some insight into why the unemployment numbers published don’t seem to add up relative to other economic indicators: small businesses have been holding up the labour market by hiring 3.67 million more people than have been laid off or who quit since February 2020.

However, unlike larger businesses, small businesses are far more susceptible to rising costs and inflationary cycles. AllianceBernstein estimates that inflationary pressure will likely remain high at least for the current quarter, with the US GDP showing nearly no growth and US monetary policy expected to remain tight throughout the year.

China, too, is estimated to have a drop in consumption and investments relative to historical trends – although it won’t be quite as drastic as seen in the earlier part of 2022.

So what explains the mildly positive market valuation in the year so far? Well, outside of the little-understood “January Effect” (which was discussed last week), there is at least one other factor: money market fund inflows. Investors have added nearly $135 billion to global money-market funds (MMFs) in the four weeks between mid-December 2022 till mid-January of this year, estimated to have been the best period for money-market funds since the 4-week period that ended in May 2020.

Throughout 2022, retail investors abandoned U.S. equity markets and cashed out rather than continue to hold sky-high convictions in popular stocks. As 2023 dawned, however, the MMF data indicates the quiet resurgence of the institutional professional reaffirming their dominance in determining market investment trajectories. Given that MMFs are required to create positions in accordance with clients investing into their funds, it stands to reason that this purchasing activity imparted some momentum to the U.S. equity market, despite the neutral-to-bearish macroeconomic outlook.

Assets sitting in money-market funds hit a record $5.18 trillion in December, surpassing the previous high of $5.16 trillion in May 2020. The average return on U.S. money-market funds this month (until the 23rd of January) is 4.12%, the highest yield since the 2008 Global Financial Crisis.

Just as with the previous week’s article, the base takeaway remains unchanged: current conditions seem to be optimal for realizing short-term profits from tactical trading, which Exchange-Traded Products (ETPs) are perfectly poised to deliver at very economical and scalable costs. Learn more about Exchange Traded Products that provide magnified exposure on either the upside or the downside of major markets, sectors and investor-favourite stocks here.

Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

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The value of an investment in ETPs may go down as well as up and past performance is not a reliable indicator of future performance. Trading in ETPs may not be suitable for all types of investor as they carry a high degree of risk. You may lose all of your initial investment. Only speculate with money you can afford to lose. Changes in exchange rates may also cause your investment to go up or down in value. Tax laws may be subject to change. Please ensure that you fully understand the risks involved. If in any doubt, please seek independent financial advice. Investors should refer to the section entitled “Risk Factors” in the relevant prospectus for further details of these and other risks associated with an investment in the securities offered by the Issuer.

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This website complies with the regulatory requirements of the United Kingdom. There may be laws in your country of nationality or residence or in the country from which you access this website which restrict the extent to which the website may be made available to you.

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Certain documents made available on the website have been prepared and issued by persons other than Leverage Shares Management Company. This includes any Prospectus document. Leverage Shares Management Company is not responsible in any way for the content of any such document. Except in those cases, the information on the website has been given in good faith and every effort has been made to ensure its accuracy. Nevertheless, Leverage Shares Management Company shall not be responsible for loss occasioned as a result of reliance placed on any part of the website and it makes no guarantee as to the accuracy of any information or content on the website. The description of any ETP Security referred to in this website is a general one. The terms and conditions applicable to investors will be set out in the Prospectus, available on the website and should be read prior to making any investment.

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This website is maintained by Leverage Shares Management Company, which is a limited liability company and is incorporated in Ireland with registered offices at 2 Grand Canal Square, Grand Canal Harbour, Dublin 2.

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Terms and Conditions

Notice

If you are not classified as an institutional investor, you will be categorised as a private/retail investor. At this time, we cannot send communications directly to private/retail investors. You are welcome to view the contents of this website.

If you are an ‘Institutional investor’, you affirm either that you are a Per Se Professional Client, or that you wish to be treated as an Eligible Counterparty Client, both as defined under the Markets in Financial Instruments Directive, or an equivalent in a jurisdiction outside the European Economic Area.

Risk Warnings

The value of an investment in ETPs may go down as well as up and past performance is not a reliable indicator of future performance. Trading in ETPs may not be suitable for all types of investor as they carry a high degree of risk. You may lose all of your initial investment. Only speculate with money you can afford to lose. Changes in exchange rates may also cause your investment to go up or down in value. Tax laws may be subject to change. Please ensure that you fully understand the risks involved. If in any doubt, please seek independent financial advice. Investors should refer to the section entitled “Risk Factors” in the relevant prospectus for further details of these and other risks associated with an investment in the securities offered by the Issuer.

This website is provided for your general information only and does not constitute investment advice or an offer to sell or the solicitation of an offer to buy any investment.

Nothing on this website is advice on the merits of any product or investment, nothing constitutes investment, legal, tax or any other advice nor is it to be relied on in making an investment decision. Prospective investors should obtain independent investment advice and inform themselves as to applicable legal requirements, exchange control regulations and taxes in their jurisdiction.

This website complies with the regulatory requirements of the United Kingdom. There may be laws in your country of nationality or residence or in the country from which you access this website which restrict the extent to which the website may be made available to you.

United States Visitors

The information provided on this site is not directed to any United States person or any person in the United States, any state thereof, or any of its territories or possessions.

Persons accessing this website in the European Economic Area

Access to this site is restricted to Non-U.S. Persons outside the United States within the meaning of Regulation S under the U.S. Securities Act of 1933, as amended (the “Securities Act”). Each person accessing this site, by so doing, acknowledges that: (1) it is not a U.S. person (within the meaning of Regulation S under the Securities Act) and is located outside the U.S. (within the meaning of Regulation S under the Securities Act); and (2) any securities described herein (A) have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction and (B) may not be offered, sold, pledged or otherwise transferred except to persons outside the U.S. in accordance with Regulation S under the Securities Act pursuant to the terms of such securities. None of the funds on this website are registered under the United States Investment Advisers Act of 1940, as amended (the “Advisers Act”).

Exclusion of Liability

Certain documents made available on the website have been prepared and issued by persons other than Leverage Shares Management Company. This includes any Prospectus document. Leverage Shares Management Company is not responsible in any way for the content of any such document. Except in those cases, the information on the website has been given in good faith and every effort has been made to ensure its accuracy. Nevertheless, Leverage Shares Management Company shall not be responsible for loss occasioned as a result of reliance placed on any part of the website and it makes no guarantee as to the accuracy of any information or content on the website. The description of any ETP Security referred to in this website is a general one. The terms and conditions applicable to investors will be set out in the Prospectus, available on the website and should be read prior to making any investment.

Leverage Investment

Leverage Shares exchange-traded products (ETPs) provide leveraged exposure and are only suitable for experienced investors with knowledge of the risks and potential benefits of leveraged investment strategies.

Cookies

Leverage Shares Management Company may collect data about your computer, including, where available, your IP address, operating system and browser type, for system administration and other similar purposes (click here for more information). These are statistical data about users’ browsing actions and patterns, and they do not identify any individual user of the website. This is achieved by the use of cookies. A cookie is a small file of letters and numbers that is put on your computer if you agree to accept it. By clicking ‘I agree’ below, you are consenting to the use of cookies as described here. These cookies allow you to be distinguished from other users of the website, which helps Leverage Shares Company provide you with a better experience when you browse the website and also allows the website to be improved from time to time. Please note that you can adjust your browser settings to delete or block cookies, but you may not be able to access parts of our website without them.

This website is maintained by Leverage Shares Management Company, which is a limited liability company and is incorporated in Ireland with registered offices at 2 Grand Canal Square, Grand Canal Harbour, Dublin 2.

By clicking you agree to the Terms and Conditions displayed.