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The Fed disclosed its Minutes yesterday from their December meeting. Here are the key points:
· Officials share the markets’ view of rates at/near peak levels for this cycle.
· They also agree that rates will come down in 2024.
· However, are cautious about the scale and speed of the cuts.
The tone was overall more cautious and even slightly hawkish than probably most market participants expected.
FOMC members do not want to repeat the 1970s and 1980s inflation disaster, where rates were cut prematurely and inflation got seriously out of hand.
That message seems to be waking up the bears, as traders are now pricing in
a 68% chance of a Fed rate cut in March, down from an 86% chance last week.
(The Red circle shows the aftermath of the Fed Minutes, while the green
circle indicates the market reaction to the FOMC Dec meeting).
Source: ZH
Perhaps it’s “sober January,” as everyone’s back from vacation; this week is becoming a reality check to the past several weeks of euphoria, where the S&P nearly crossed its all-time high.
The markets still forecast double the number of cuts, or 6 to be precise, compared to the Fed guidance of 3; green shading represents the FOMC meeting.
Source: ZH
Past leaders could become future laggards.
It’s not a secret that the tech darlings have been carrying the market on their shoulder in 2023.
The S&P 500 ended 2023 with a remarkable nine-week run of consecutive gains, driven by the excitement over artificial intelligence (AI) and expectations that the Federal Reserve would begin reducing interest rates soon.
Source: Edward Jones
Last year, a few large tech companies, notably the “Magnificent 7” (Amazon, Apple, Alphabet, Meta, Microsoft, NVIDIA, and Tesla), greatly influenced the overall market. By mid-year, these companies were behind 90% of the S&P 500’s increases, largely thanks to advancements in AI that captured investors interest.
However, the average stock didn’t perform as well, mainly staying the same until mid-November, affected by ongoing concerns about high-interest rates. This was evident when comparing the S&P 500 Equal Weight Index, where each stock is equally weighted and showed no growth for the year, to the 100% gain of the Magnificent 7.
Here is another look at just how wildly valued the Mag 7 stocks are
The market cap of the 7 high-flying stocks stands at nearly 12 trillion, equating to that of the stock market size of Japan, Canada, and the UK combined!
Source: Apollo
On the other end of the spectrum were most companies in the S&P 500.
A record-high share of stocks in the S&P 500 have underperformed the index this year.
Source: Appollo
This divergence, so-called “bad breadth” in the U.S. stock market, is nothing new, but periods when this metric is elevated proceed with recessions, as indicated by the shaded areas.
, the market has become top-heavy, relying on a few household names to continue to drive virtually all the gains in the S&P 500, which leads to over-concentration risks.
The January Effect
Historically, January has been one of the strongest, if not the strongest, month for equity returns.
Source: WSJ
Historical data from Dow Jones Market Data, dating back to 1928, shows that the S&P 500 typically sees an average increase of 1.2% in January, with a success rate exceeding 60%. Similarly, the Nasdaq Composite has historically performed best in January, averaging a 2.5% gain and experiencing upward movements 65% of the time.
Investors often purchase fresh shares following December’s tax-loss selling, which is done to balance out realized capital gains. Additionally, there’s a belief that investors have increased funds available for market investments in January, often due to receiving year-end bonuses.
Investors long the S&P 500 using our 3x US 500
Alternatively, investors can short the S&P 500 using our -3x US 500
Investors long the Mag 7 using our FAANG+
Alternatively, investors can short the Mag 7 holdings using our -3x Apple , -3x NVIDIA , -3x Tesla , -3x Microsoft , -3x Alphabet , -3x Amazon , -1x Netflix .
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 ETP securities are intended for sophisticated investors who (i) are able to monitor their investment in the ETP securities on a frequent basis in line with the recommended holding period; (ii) understand the risk of compounded returns and the increased risk of investment in leveraged products; (iii) can afford to risk losing their investment; and (iv) and have a very short investment horizon in line with the recommended holding period. 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 material is not intended to be relied upon as a forecast, research or investment advice and is not a recommendation, offer or solicitation to buy or sell any financial instrument or product or to adopt any investment strategy. Any decision to invest should be based on the information contained in the relevant base prospectus after seeking independent investment, tax and legal advice.
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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.
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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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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.
