Notice of Index Modifications: Ferrari ETPs

Аватар на автора

Author

Boyan Girginov

Date

US Economy Fires on All Cylinders

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·       4th Quarter GDP exceeded expectations, while inflation moderated

·       “Goldilocks” scenario and easing inflation should be supportive of financial markets

 

The US Economy is going strong

US GDP expanded in the fourth quarter of 2023 at 3.3%, much higher than the expected 2.0%[1], as the largest economy continues to show signs of strength.

Source: FRED

The U.S. reported a robust 3.3% annualized growth in GDP for the fourth quarter, significantly surpassing the anticipated 2.0% expansion. This impressive performance was largely due to the continued strength in consumer spending, which increased by 2.8%. This marks the sixth consecutive quarter where the U.S. economy has grown by over 2.0%, exceeding the expected potential growth rate of 1.5% to 2.0%, even amidst elevated interest rates. The past two quarters have been solid, with 4.9% and 3.3% growth rates, respectively, indicating a trend well above the average.

Looking ahead, a slight decrease in growth is anticipated, potentially aligning with, or falling slightly below the usual growth trend. This expected slowdown could stem from decreased consumer spending and a potential overdue easing in the labour market. However, it’s unlikely that this will lead to a negative growth scenario.

The prospect of a ‘soft landing’ for the number one economy in the world still seems plausible. As the year unfolds, there’s potential for a renewed increase in economic growth, especially if inflation continues to ease, allowing the Federal Reserve to lower interest rates and ultimately benefit the consumer.

Inflation data in line with Goldilocks scenario

The most recent data on the personal consumption expenditure (PCE) deflator, a preferred inflation gauge of the Federal Reserve, indicates a clear downward trend. The core index, which excludes volatile components like food and energy, has slightly fallen below 3%[2] and is way down from a high of 5.6% in 2022.

Source: FRED

 

Notably, the year-over-year core PCE inflation now stands at 2.9%, a decrease from the previous month’s 3.2% and under 3.0% for the first time since 2021. This consistent decrease in inflation, despite the economy growing above its usual trend, fuels optimism about the Federal Reserve’s potential to commence reducing policy rates as the year progresses, aiming for more neutral rates.

This occurred alongside a strong job market that continued to fuel consumer spending. Although some of this momentum is predicted to slow down in the current year, numerous analysts still anticipate that the economy will avoid a recession.

Markets do well in a “Soft Landing.”

Traditionally, market performance often improves when the Federal Reserve initiates a cycle of reducing interest rates and the economy is not experiencing a recession.

Source: Edward Jones

Looking back to 1990, the average 12-month return following the initial rate cut by the Fed during non-recession periods is approximately 7.6%[3]. This contrasts with a mere 0.5% return during recessionary periods. The recent robust economic data from the U.S. suggests a growing possibility of a soft-landing scenario in 2024, potentially leading to favourable market returns as the Fed starts lowering rates.

The S&P 500 saw a 24% increase last year[4]. This significant growth was partly due to excitement surrounding artificial intelligence (AI) and reflected the US economy’s resilience despite the Fed’s persistent rate increase.

However, last year’s gains were concentrated in a narrow group of stocks known as the “Magnificent 7”.

Historical trends suggest that markets have the potential to prosper in a scenario where inflation eases and the Fed cuts rates, particularly when the economy manages a smooth landing.

Combining a robust economy and diminishing inflation enhances the likelihood of a smooth economic adjustment.

Investors can long the S&P 500 using our 3x US 500, 5x US 500.

Alternatively, investors can short the S&P 500 using our -3x US 500.



[1] https://www.bloomberg.com/news/articles/2024-01-25/us-gdp-grew-at-a-3-3-rate-in-fourth-quarter-capping-solid-year

[2] https://www.bloomberg.com/news/articles/2024-01-25/us-gdp-grew-at-a-3-3-rate-in-fourth-quarter-capping-solid-year

[3] https://www.edwardjones.com/us-en/market-news-insights/stock-market-news/stock-market-weekly-update

[4] https://www.macrotrends.net/2526/sp-500-historical-annual-returns

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.

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By clicking you agree to the Terms and Conditions displayed.