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Education Series: Single-Stock ETPs

U.S. Debt Bubble has Popped

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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

The U.S. is set to release its initial estimate of Q4 GDP on Thursday, with analysts projecting a 2.6% annualized growth rate following 3.2% in Q3. Despite this apparent strength, recent economic indicators suggest the economy is losing momentum at the end of 2022, with retail sales falling, industrial production decreasing, and residential construction experiencing six consecutive monthly declines.

GDP is expected to weaken in the upcoming quarters due to the Federal Reserve’s ongoing interest rate hikes. The dollar has also dropped to a nine-month low as market expectations shift towards the Fed implementing smaller rate hikes at its next meeting in January/February.

Additionally, the U.S. government has reached its $31.4 trillion borrowing limit, leading to a dispute between President Biden’s Democrats and Republicans over raising the debt ceiling. This could result in a prolonged stalemate and potentially a last-minute resolution before June, when the Treasury may run out of options to avoid default.

A slew of earnings results from major companies in the coming week, such as Microsoft and Tesla, will also be closely watched as the economy shows signs of slowing down. Concerns of a possible recession amid high interest rate environment have hit growth sectors, pushing major tech companies to lay off thousands of employees.

Reporting season will be in full swing in the next two weeks, with Microsoft reporting on Tuesday, Tesla Inc and IBM on Wednesday, and Intel on Thursday, with analysts expecting Q4 2022 YOY earnings to decline.

Although recent data showed that inflation has cooled, it has also highlighted the labour market remains tight offering the central bank room to stick with its aggressive policy tightening. According to the CME FedWatch tool the Fed is likely to hike interest rates with 25 basis point at its next two-day policy meeting starting on the 31st of January, bringing the Fed funds rate to a range of 4.50% – 4.75%.

Before that meeting, the Fed have additional key economic data for review such as Q4 2022 GDP data which will be released on Thursday and the Fed’s preferred inflation indicator – the Personal Consumption Expenditures report due on Friday.

While America is not in an official recession yet, there is widespread deterioration in economic conditions in recent months, such as labour markets, manufacturing, housing construction triggered by the barrage of interest rate hikes by the Fed in its effort to bring down inflation. The market is expecting overall economic activity to deteriorate further in the coming quarters before picking up in the final quarter of 2023.

Source: Tradingview

After a solid start to the year, U.S. markets retreated last week, and bond yields sagged further on renewed doubts over the growth outlook. However, the tech heavy index rebounded strongly this week and is currently flirting with its long-term down trend line crossing at 4,030.

A break above this level of dynamic resistance is possible, after the index has been hammered in 2022 and investors are currently bargains hunting, in particular beaten down big tech names with prospect to beat expectations and recover in 2023.

While an extension of the current rebound to 4,100 – 4,200 could be seen in the near-term, this potential rally is not likely to lead to a major reversal of the 2022 bear market and we believe further weakness before things get better is on the cards in the coming months.

Active traders looking for magnified exposure to U.S. equity market could consider our +3x Long US Tech100 and -3x Short US Tech100 ETPs.

Investing in ETPs has never been more accessible than it is today. Our ETFs are designed to provide investors with the opportunity to diversify their portfolios and gain exposure to a wide range of assets, all while minimizing risk.

In summary, our ETPs provide a unique investment opportunity for investors looking for diversification, leverage, and liquidity. Don’t miss out on the chance to grow your wealth and achieve your financial goals.

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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Sandeep Rao

Research

Sandeep joined Leverage Shares in September 2020. He leads research on existing and new product lines, asset classes, and strategies, with special emphasis on analysis of recent events and developments.

Sandeep has longstanding experience with financial markets. Starting with a Chicago-based hedge fund as a financial engineer, his career has spanned a variety of domains and organizations over a course of 8 years – from Barclays Capital’s Prime Services Division to (most recently) Nasdaq’s Index Research Team.

Sandeep holds an M.S. in Finance as well as an MBA from Illinois Institute of Technology Chicago.

Violeta Todorova

Senior Research

Violeta joined Leverage Shares in September 2022. She is responsible for conducting technical analysis, macro and equity research, providing valuable insights to help shape investment strategies for clients.

Prior to joining LS, Violeta worked at several high-profile investment firms in Australia, such as Tollhurst and Morgans Financial where she spent the past 12 years of her career.

Violeta is a certified market technician from the Australian Technical Analysts Association and holds a Post Graduate Diploma of Applied Finance and Investment from Kaplan Professional (FINSIA), Australia, where she was a lecturer for a number of years.

Julian Manoilov

Senior Analyst

Julian joined Leverage Shares in 2018 as part of the company’s premier expansion in Eastern Europe. He is responsible for web content and raising brand awareness.

Julian has been academically involved with economics, psychology, sociology, European politics & linguistics. He has experience in business development and marketing through business ventures of his own.

For Julian, Leverage Shares is an innovator in the field of finance & fintech, and he always looks forward with excitement to share the next big news with investors in the UK & Europe.

Oktay Kavrak

Director

Oktay joined Leverage Shares in late 2019. He is responsible for driving business growth by maintaining key relationships and developing sales activity across English-speaking markets.

He joined LS from UniCredit, where he was a corporate relationship manager for multinationals. His previous experience is in corporate finance and fund administration at firms like IBM Bulgaria and DeGiro / FundShare.

Oktay holds a BA in Finance & Accounting and a post-graduate certificate in Entrepreneurship from Babson College. He is also a CFA charterholder.

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