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Education Series: Single-Stock ETPs

Could the Rally Keep Rolling?

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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 labor market continues to exhibit strength in the face of broader economic challenges, as evidenced by the latest employment report from the Labor Department. In December, nonfarm employment recorded a robust increase of 223,000 jobs, surpassing analysts’ expectations and unemployment declining to a 50-year low of 3.5%.

However, it’s important to note that the impressive unemployment rate is accompanied by a moderating wage growth, sparking speculation that the Federal Reserve may shifts away from its aggressive monetary policy stance.

The tight labor market conditions, as indicated by the recent drop in weekly jobless claims and the smaller-than-expected decrease in jobs openings, which suggests that the Fed is likely to continue to raise interest rates in the near term. The number of unemployed persons decreased by 278,000 to 5.72 million in December, and the number of employed individuals increased by 717,000 to 159.2 million.

Although the U.S. payrolls report showed labour market have remained tight, readings on wage growth and a surprisingly sharp downturn in service sector business confidence last month encouraged those betting on an early peak in Federal Reserve interest rates this year.

Softening average hourly earnings also contributed to a rally in stocks, as investors believe that the unemployment rate is less critical for the Fed if wage growth is moderating. This had led to expectations of a 25-basis point increase in the Fed’s benchmark interest rate at the next policy meeting on 1st of February.

This economic data also fuels the speculation of further Federal Reserve rate hikes in the near term, with Fed futures predicting a total of 60 basis points by mid-year, and a half point of rate cuts over the second half of 2023, despite Fed officials not foreseeing rate cuts in 2023.

However, inflation data due on Thursday, and the start of corporate earnings season on Friday, will provide a more comprehensive understanding of the economy’s health and potential for slowdown. The underlying market indication is that the U.S. economy is heading towards a steady state, and it’s a perfect time for investors to keep an eye on the next step of monetary policy, and the impact of inflation on the economy.

The data paints a picture of a labor market that is defying broader economic headwinds and demonstrating remarkable resilience. Investors are raising questions about the Federal Reserve monetary policy, making it an essential time to keep a keen eye on the economy and upcoming data releases.

Source: Tradingview

The economic calendar this week is poised to be dominated by the release of inflation data for December and the onset of the fourth quarter earnings season. Inflation data for December will provide valuable insights and could influence the size of the Federal Reserve’s next rate hike, while corporate earnings will give an important insight into the health of the economy amid concerns over a potential slowdown.

Investors will be closely monitoring the release of Q4 earnings reports from companies, as they seek to discern any signs of a potential economic slowdown and its impact on bottom lines. Several investment houses have recently indicated that further downward revisions to 2023 EPS forecasts are likely to come. Investors should be vigilant as the Q4 reporting season rolls in, as it would provide a good picture of the state of the economy and could put a lid on the current rally.

Active traders looking for magnified exposure to U.S. indices could consider our +3x Long US Tech100 and -3x Short US Tech100 ETPs

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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