Notice of Index Modifications: Ferrari ETPs

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Author

Violeta Todorova

Date

Stock Market Slums on Disappointing US CPI

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  • Monthly consumer price index surprisingly accelerated in January.
  • Probability of rate cuts in the first half of the year diminished markedly.
  • Disappointing inflation data sparked meltdown in equity markets.

The consumer price index (CPI) rose more-than-expected in January as shelter costs, which accounts for one-thirds of the index and healthcare picked up. The underlying CPI accelerated 0.3% last month, up from 0.2% reading in December, according to the Bureau of Labour Statistics. On an annual basis the CPI increased 3.1%, down from 3.4% in December. Both metrics came above market expectations of 0.2% monthly and 2.9% annual rise.

The monthly core CPI which excludes the volatile food and energy prices increased 0.4% from 0.3% the prior month. The annual core CPI came up 3.9% and remained unchanged from December. Both readings exceeded market expectations of 0.3% a 3.5% rise respectively.

A graph of a graph

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Source: TradingView, Bureau of Labour Statistics, Inflation Rate YoY

While inflation is broadly moderating from its peak of 9.1% in June 2022, the path to the Fed’s target of 2% may be bumpy. The increase in prices in January was the largest over the past four months amid robust labour market and resilient economy. While the higher readings are disappointing, businesses usually increase their prices at the beginning of the year, making January usually a strong month for inflation.

In our view, the longer-term trend of moderating inflation is intact, and the January data is insufficient to suggest a resurgence in inflation. Also, not all of the components that drove inflation higher in January would go in the calculation of the personal consumption expenditures index (PCE), which is the Fed’s preferred measure of inflation.

Nonetheless, the disappointing CPI report together with the latest strong non-farm payroll report, triggered market repricing of rate cut expectations to fall to 90 basis points(bps) from 160 bps at the end of 2023.

After the hotter-than-expected inflation data, the slim chances that the Fed could start lowering interest rates in the first half of the year have diminished further. A March rate cut is now completely ruled out, while hopes for a cut in May decreased markedly. According to the CME FedWatch Tool the odds for a March rate cut are now at 8%, while the probabilities for a cut in May declined to 32%.

A graph of stock market

Description automatically generated

Source: TradingView

Equity markets nosedived on Tuesday as the disappointing inflation data report dampened investors’ hopes of a rate cut in May, just a day after stock indices posted fresh record highs. Investors were widely expecting four to five interest rate cuts in 2024 according to the CME FedWatch Tool, while Fed officials have been repeatedly reinforcing that the central bank envisions three rate cuts at the most.

Markets ignored the Fed’s warnings that rates are staying higher for longer and have created the biggest discrepancy between policymakers and investors expectations. The latest CPI report threw a backet of cold water on these expectations and respectively on the market rally which has been unfolding almost uninterruptedly over the past fifteen weeks.

The relentless rally pushed the benchmark U.S. index to an all-time high of 5,048 on Monday, marking a gain of 23% since its October low. On Tuesday the market tanked 1.4% and the pull back is likely to extend further in the short-term as we see signs of exhaustion in momentum. A triple bearish divergence between the price and the Relative Strength Index (RSI) has formed over the past two months suggesting that the rally is losing steam, which points to a potential deeper pull back in the short-term.

Active traders looking to gain leveraged exposure to the index may consider our +5x Long US 500 and -3x Short US 500 ETPs.

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

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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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.