fbpx

Are Markets Recovering? A Closer Look

Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

News about market movements in financial publications have been rather positive in the year so far. This might lead retail investors to believe that the risk factors for the downside have decreased and its the return of the bull market that lasted nearly 5 years before the pandemic became global (and for a short while after movement restrictions were lifted in kay areas of the Western Hemisphere). However, an enthusiastic return to bullish estimations might be premature.

Mr. Jurrien Timmer, Fidelity’s Director of Global Macro, estimated that in the year till date, margins seem to be bearing the brunt of the earnings estimate downgrades, thus falling from 13.7% to 12.2%. Even present-day valuations are being deemed as being high by historical standards, and well above the pre-COVID peak over the past fifteen years.

Mr. Timmer further elucidated that while US earnings estimates are coming down hard, the rest of the world seems to be stabilizing. In year-over-year change in forward estimates, Emerging Markets (EM) stocks had earlier been at the bottom of the pack and are now flattening out.

This is by no means is a minority opinion. As the article from nearly two weeks ago highlighted, most leading analysts posit that India will lead the pack of EM instruments that will do well in this year.

The deflation of US stock valuation is quite an interesting turn of events. Historically, US equities have been the most overvalued stocks in the world, which was achieved in no small part by strong «brand recall» among investors worldwide due to the large volumes of media output about them. Charles Schwab estimates that the projected returns over the next ten years is showing a bearish tendency with at least some signs of a deflation in the 10-year forecast in the estimates made last year versus the current.

Belying any expectations of a recovery have been the downsizing actions of the US economy. New data gives some insight into why the unemployment numbers published don’t seem to add up relative to other economic indicators: small businesses have been holding up the labour market by hiring 3.67 million more people than have been laid off or who quit since February 2020.

However, unlike larger businesses, small businesses are far more susceptible to rising costs and inflationary cycles. AllianceBernstein estimates that inflationary pressure will likely remain high at least for the current quarter, with the US GDP showing nearly no growth and US monetary policy expected to remain tight throughout the year.

China, too, is estimated to have a drop in consumption and investments relative to historical trends – although it won’t be quite as drastic as seen in the earlier part of 2022.

So what explains the mildly positive market valuation in the year so far? Well, outside of the little-understood «January Effect» (which was discussed last week), there is at least one other factor: money market fund inflows. Investors have added nearly $135 billion to global money-market funds (MMFs) in the four weeks between mid-December 2022 till mid-January of this year, estimated to have been the best period for money-market funds since the 4-week period that ended in May 2020.

Throughout 2022, retail investors abandoned U.S. equity markets and cashed out rather than continue to hold sky-high convictions in popular stocks. As 2023 dawned, however, the MMF data indicates the quiet resurgence of the institutional professional reaffirming their dominance in determining market investment trajectories. Given that MMFs are required to create positions in accordance with clients investing into their funds, it stands to reason that this purchasing activity imparted some momentum to the U.S. equity market, despite the neutral-to-bearish macroeconomic outlook.

Assets sitting in money-market funds hit a record $5.18 trillion in December, surpassing the previous high of $5.16 trillion in May 2020. The average return on U.S. money-market funds this month (until the 23rd of January) is 4.12%, the highest yield since the 2008 Global Financial Crisis.

Just as with the previous week’s article, the base takeaway remains unchanged: current conditions seem to be optimal for realizing short-term profits from tactical trading, which Exchange-Traded Products (ETPs) are perfectly poised to deliver at very economical and scalable costs. Learn more about Exchange Traded Products that provide magnified exposure on either the upside or the downside of major markets, sectors and investor-favourite stocks here.

Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

Post correlati

Violeta-540x540-1.jpg
Violeta Todorova
Supply, demand disequilibrium and lower US rates could squeeze the non-precious metal
Supply, demand disequilibrium and lower US rates could squeeze the non-precious metal
Violeta-540x540-1.jpg
Boyan Girginov
Supply, demand disequilibrium and lower US rates could squeeze the non-precious metal
Supply, demand disequilibrium and lower US rates could squeeze the non-precious metal
Supply, demand disequilibrium and lower US rates could squeeze the non-precious metal
Q2 is poised for European stocks’ turnaround and rising interest in energy stocks
Q2 is poised for European stocks’ turnaround and rising interest in energy stocks
Violeta-540x540-1.jpg
Sandeep Rao
Q2 is poised for European stocks’ turnaround and rising interest in energy stocks
Q2 is poised for European stocks’ turnaround and rising interest in energy stocks
Q2 is poised for European stocks’ turnaround and rising interest in energy stocks
Escalation of the conflict in the Middle East threatens to derail the economic recovery.
Escalation of the conflict in the Middle East threatens to derail the economic recovery.
Violeta-540x540-1.jpg
Violeta Todorova
Escalation of the conflict in the Middle East threatens to derail the economic recovery.
Escalation of the conflict in the Middle East threatens to derail the economic recovery.
Escalation of the conflict in the Middle East threatens to derail the economic recovery.
What is an ETF? How does an ETF work? Key characteristics of ETFs.
What is an ETF? How does an ETF work? Key characteristics of ETFs.
Violeta-540x540-1.jpg
Boyan Girginov
What is an ETF? How does an ETF work? Key characteristics of ETFs.
What is an ETF? How does an ETF work? Key characteristics of ETFs.
What is an ETF? How does an ETF work? Key characteristics of ETFs.
Violeta-540x540-1.jpg
Pawel Uchman
A quick primer on leveraged instruments available in markets today.
A quick primer on leveraged instruments available in markets today.
Violeta-540x540-1.jpg
Sandeep Rao
A quick primer on leveraged instruments available in markets today.
A quick primer on leveraged instruments available in markets today.
A quick primer on leveraged instruments available in markets today.

Violeta Todorova

Senior Research

Violeta se unió a Leverage Shares en septiembre de 2022. Ella gestiona la realización de análisis técnicos, investigación macroeconómica y de acciones, y ofrece información valiosa que ayuda a la definición de estrategias de inversión para los clientes.

Antes de unirse a LS, Violeta trabajó en varias empresas de inversión de alto perfil en Australia, como Tollhurst y Morgans Financial, donde pasó los últimos 12 años de su carrera.

Violeta es una técnica de mercado certificada de la Asociación Australiana de Analistas Técnicos y tiene un Diploma de Postgrado en Finanzas e Inversiones Aplicadas de Kaplan Professional (FINSIA), Australia, donde fue profesora durante varios años.

Julian Manoilov

Marketing Lead
Julián se unió a Leverage Shares en 2018 como parte de la principal expansión de la compañía en Europa del Este. Él es responsable de diseñar estrategias de marketing y promover el conocimiento de la marca.

Oktay Kavrak

Head of Communications and Strategy

Oktay se incorporó en Laverage Shares a fines de 2019. Él es responsable de impulsar el crecimiento del negocio al mantener relaciones clave y desarrollar la actividad de ventas en los mercados de habla inglesa.

Él vino de UniCredit, donde fue gerente de relaciones corporativas para empresas multinacionales. Su experiencia previa es en finanzas corporativas y administración de fondos en empresas como IBM Bulgaria y DeGiro / FundShare.

Oktay tiene una licenciatura en Finanzas y Contabilidad y un certificado de posgrado en formación empresarial de Babson College. También es titular de una certificado CFA (Chartered Financial Analyst).

Sandeep Rao

Investigación

Sandeep se unió a Leverage Shares en septiembre de 2020. Está a cargo de la investigación de líneas de productos existentes y nuevas, clases de activos y estrategias, con un enfoque particular en el análisis de eventos y desarrollos recientes.

Sandeep tiene una larga experiencia en los mercados financieros. Comenzó en un hedge fund con sede en Chicago como ingeniero financiero, su carrera abarcó varios dominios y organizaciones durante un período de 8 años, desde la División de Prime Services de Barclays Capital hasta (más recientemente) el Equipo Index Research de Nasdaq.

Sandeep tiene una maestría en Finanzas, así como un MBA del Illinois Institute of Technology de Chicago.

Gold Retreats But Rally is Not Over

Copper Ready to Explode

Q2 2024 Market Outlook: Rocky Road Ahead

What is an ETF? (Exchange Traded Fund)

How Do Leverage Shares ETPs Trade in Multiple Currencies

Currency Impact

Build your own ETP Basket
Leverage Shares: Europe’s top leveraged and inverse ETP provider.
Main ETP benefits
Common investor questions

Get the Newsletter

Never miss out on important announcements. Get premium content ahead of the crowd. Enjoy exclusive insights via the newsletter only.