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Education Series: Single-Stock ETPs

Fed Moderation Not "Pivot"

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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. economy grew faster than previously thought in the third quarter, according to a second estimate from the U.S. Bureau of Economic Analysis on Wednesday. GDP in the U.S. grew by 2.9% YoY in Q3, according to the revised figures (U.S. GDP had shrunk 0.6% YoY in Q2 and 1.6% in Q1). This represents an increase from the previous estimate of 2.6% growth, showing the U.S. economy is still faring well in a higher interest rates environment.

The Institute for Supply Management showed on Thursday that the manufacturing sector grew for the 30th month in a row but was barely above contraction in November. The ISM’s index slowed to 49%, barely above the contraction threshold at 48.7%. This is the third straight decline as demand for manufactured goods eased. The slowdown was broad-based as production, inventories, new orders, prices paid, and employment all slowed down on the month.

Overall demand remained robust as holiday shopping kicked off in October, according to data on inflation, spending and income from the Bureau of Economic Analysis released on Thursday.

The Federal Reserve’s preferred inflation metric – the personal consumption expenditures (PCE) price index—came in better than expected. While overall PCE inflation was unchanged at 0.3% MoM, core inflation slowed significantly to 0.2% from 0.5%. On an annual basis, inflation eased to 6.0% while core inflation was down to 5.0%.

International Monetary Fund Managing Director Kristalina Georgieva said on Thursday the chance of global growth falling below 2% next year was increasing due to continued effects of the war in Ukraine and simultaneous slowdowns in Europe, China and the United States.

The IMF in October cut its global growth forecast for 2023 to 2.7%, compared to a 2.9% forecast in July, amid colliding pressures from the war in Ukraine, high energy and food prices, inflation and sharply higher interest rates, warning that conditions could worsen significantly next year.

The highly anticipated monthly Nonfarm Payroll report on Friday showed that the U.S. economy unexpectedly added 263K jobs in November, beating market forecast of 200K, following a print of 284K in October, despite a wave of layoffs that have hit the tech sector in recent weeks. While this is the smallest gain since April 2021, the labour market continues to be healthy and above the pre-pandemic average of 150-200K new jobs a month.

Source: Tradingview

Equity markets rallied across the board on Wednesday as Fed Chair Jerome Powell signalled a slowdown in the pace of interest rate hikes at its final policy-setting meeting in December. And while this is a shift, not a pivot, and rates could go higher than forecasted earlier and stay elevated for a while, markets got excited and staged an impressive rally with the NASDAQ 100 gaining 4.6% on the day. There was a degree of scepticism around this market response, given that it essentially aligned with market expectations for the past few weeks, but sentiment shifted favourably, nevertheless.

Friday’s stronger than expected jobs report spooked the rally and U.S. equity futures are trading deeply in the red. The tight labour market conditions and the sharply rising wages are likely to be too high for the Fed’s liking.

The NASDAQ 100 rebounded close to its medium-term down trend line crossing at 12,200 where initial selling pressure is likely to arise. If the enthusiasm that a slowdown in the Fed rate policy cannot inherently carry the current rebound forward, then other concerns will start to leak in – such as the threat of a recession. Overall, we see the current rally as having a limited upside potential and we favour further weakness in the coming months.

Investors willing to take an extra risk could check out our 3x Long US Tech 100 and/or our -3x Short US Tech100.

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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