U.S. equity indices made a considerable effort to extend the choppy bullish trend from the October 2022 low over the past week, and investors focused on the fervour of a cooling monetary policy regime from the Fed. Comments from Fed Chair Jerome Powell that a reduction in the pace of tightening was ahead, while also warning that the terminal rate would be higher than previously expected was the latest spark that excited investors.
Neither reference was particularly new from the Fed’s forward guidance; however, equity markets extended the rally from the October low, with the S&P 500 advancing above its 200-day moving average for the first time since April. The enthusiasm was quickly questioned when the PCE deflator, the Fed’s favourite inflation indicator, didn’t inspire any follow through despite its cooling, and the NFP surprise beat ultimately cooled the market.
The data published by the U.S. Census Bureau revealed on Monday that new orders for manufactured goods, increased $5.8 billion or 1% in October to $556.6 billion. The print followed September’s growth of 0.3% and exceeded market expectation of 0.7%. New orders for manufactured durable goods in October, was up for the past seven months and had increased $3.0 billion or 1.1% to $277.4 billion.
The business activity in the U.S. service sector continued to expand at an accelerating pace in November with the ISM Services PMI rising to 56.5 in November from 54.4 in October. The reading exceeded market expectations of 53.1.
The inflation component of the survey, the Prices Paid Index, declined to 70 from 70.7, compared to analyst estimates of 73.6. The Employment Index rose to 51.1 from 49.1 and the New Orders Index edged lower to 56 from 56.5.
Monday’s upbeat ISM data followed the stronger-than-expected NFP report, which has also thrown some cold water into expectations for a less aggressive tightening. The much talked about recession is not arriving yet, with Friday’s employment report showing jobs growing solidly in November and unemployment remaining at a 50-year low of 3.7%. This shows that the U.S. economy is resilient and if/when a recession comes it might not be as bad as investors fear.
With wage inflation around 5% it looks like the Fed’s 5% federal funds rate is still too low to curb economic activity. The Fed funds rate might have to get above 5% before it starts to impact the economy.
The Fed is in its pre- FOMC meeting blackout period and is unable to direct expectations before its final meeting for the year scheduled for 13th – 14th of December. The expectation is that it will raise rates again, but by a smaller 50 basis point increment than it has at each of its last four meetings.
Despite the powerful rebound since mid-October, we don’t think the conditions for a sustained market rally are in place yet. The S&P 500 lost more than 72 points on Monday, as better-than-expected economic data doused hopes for a pause in the Fed’s aggressive monetary policy tightening. The medium-term down trend line crossing at 4,080 it is likely to act as a dynamic resistance for the index. The leading RSI indicator broke below its up-trend line showing that internal momentum conditions are deteriorating and could be the precursor for a powerful decline in the coming month(s). The first potential downside target is 3,800; however, over the medium-term levels to 3,400 appear achievable.
Violeta è entrata a far parte di Leverage Shares nel settembre 2022. È responsabile dello svolgimento di analisi tecniche e ricerche macroeconomiche ed azionarie, fornendo pregiate informazioni per aiutare a definire le strategie di investimento per i clienti.
Prima di cominciare con LS, Violeta ha lavorato presso diverse società di investimento di alto profilo in Australia, come Tollhurst e Morgans Financial, dove ha trascorso gli ultimi 12 anni della sua carriera.
Violeta è un tecnico di mercato certificato dall’Australian Technical Analysts Association e ha conseguito un diploma post-laurea in finanza applicata e investimenti presso Kaplan Professional (FINSIA), Australia, dove è stata docente per diversi anni.
Julian è entrato a far parte di Leverage Shares nel 2018 come parte della prima espansione della società in Europa orientale. È responsabile della progettazione di strategie di marketing e della promozione della notorietà del marchio.
Oktay è entrato a far parte di Leverage Shares alla fine del 2019. È responsabile della crescita aziendale, mantenendo relazioni chiave e sviluppando attività di vendita nei mercati di lingua inglese.
È entrato in LS da UniCredit, dove è stato responsabile delle relazioni aziendali per le multinazionali. La sua precedente esperienza è in finanza aziendale e amministrazione di fondi in società come IBM Bulgaria e DeGiro / FundShare.
Oktay ha conseguito una laurea in Finanza e contabilità ed un certificato post-laurea in Imprenditoria presso il Babson College. Ha ottenuto anche la certificazione CFA.