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S&P 500 Reaches All-Time High

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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

·       S&P 500 has rallied over 35% since October 2022

·       Probability of March rate cuts tumble

 

S&P 500 Bull Run

New Bull Market, the S&P closed at 4839.81, nearly 1% higher than the previous all-time high of 4796.56.

Technically speaking, the bull market has started. In October 2022, there was surging inflation, the Fed was behind the curve, and many market participants expected a recession to hit in 2023.

More than one year later, those fears did not materialize.

A graph showing the price of the stock market

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Source: Yahoo Finance

 

Inflation moderated, the Fed reached its peak cycle rates, and earnings seem to rebound.

Stocks have climbed due to falling inflation, which caused investors to anticipate as many as six rate cuts this year as lower rates boost company valuations as it becomes cheaper for them and consumers to borrow, which caused a massive stock rally at the end of last year.

New Year, New Data

Bond yields have gone marginally higher since the New Year, as they plunged sharply at the end of 2023.

Last week saw a sharp rise in Treasury bond yields, a key indicator for borrowing expenses, following Federal Reserve Governor Christopher Waller’s warning against premature rate cuts.

This upward trend in yields persisted as reports on retail sales, housing starts, and unemployment claims all surpassed economists’ expectations.

The 10-year U.S. Treasury bond yield concluded the week at 4.15%, an increase from its starting point at the beginning of the year, which was 3.86%.

Some analysts rightly point out that the market might have gone ahead of itself, as the rate cuts might not materialize as quickly as the bullish investors are pricing them in.

Could it be that the equities rally due to irrational exuberance? Seems like it.

Typically, there is a saying about how January finishes, so the rest of the year will be for the financial markets.

A few data points will provide critical insights as to why we are heading for a soft landing, namely, Fourth Quarter GDP, the Fed’s Favourite Inflation Index, and Fed Meeting and Interest Rate Decision.

A graph showing the number of different colored squares

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Source: CME Fed Watch

 

Overall, Economic growth, inflation, and the Fed will continue to be the key drivers of financial markets this year.

The ideal scenario would be for inflation to moderate; this will allow the Fed to cut rates, and potentially, growth will re-accelerate.

However, market volatility seems to be a very plausible option in the near term, especially if given the likelihood that the Fed might push against rate cuts in March, which has tumbled from 73.4% to 53.8% in the course of the last three weeks.

Hence, prepare for a bumpy January and some volatility ahead.

 

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

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

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.

Julian Manoilov

Marketing Lead

Julian joined Leverage Shares in 2018 as part of the company’s primary 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.

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.

Oktay Kavrak

Head of Communications and Strategy

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 Leverage Shares 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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