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Nasdaq 100 Trades Near Record High

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  • Core CPI tops forecasts again, proving stickier than thought
  • Odds for first rate cut shifts from June to September
  • Markets reduce Fed cuts expectations from three to two

Inflation Concerns

The latest U.S. Consumer Price Index (CPI) data came hotter than expected, leading concerns about its stickiness. The U.S. Labor Department reported that the annual CPI rose to a 3.5% in March from 3.2% in February, while the core measure, which excludes the volatile food and energy prices increased to 3.8%, unchanged from the prior month.

The monthly CPI rose 0.4% in March, vs. expectations of 0.3% increase. The core figure rose 0.4% month-on-month in March, against expectations of a 0.3% rise.

The hotter than expected data on both underlying and core figures is indicative that inflation is sticky, which raises concerns that the Fed could either cut fewer times or not at all in 2024.

Fed Minutes

The Fed minutes on Wednesday showed that officials are worrying that inflation progress might have stalled with some members flagging the possibility that the current policy rate was not restrictive enough, and a longer period of tight monetary policy may need to be maintained to combat the pace of price rises.

Overall, the minutes showed growing Fed concern about inflation that seemed to be in the right path at the start of the year. Members pointed to the strong economic momentum and the disappointing inflation readings over the past few months, reiterating they need more confidence that inflation will continue to moderate before cutting rates.

Fed Policy

The Federal Reserve has been on a path of raising interest rates to combat inflation, but recent data suggests that inflation might not be easing as anticipated. There’s uncertainty about the timing and extent of future rate cuts by the Fed. After the release of the CPI data, the odds for an initial rate cut have shifted to September from June.

According to the CME FedWatch financial markets have now priced in a 16% likelihood of a 25 basis point Fed rate cut in June, down from 56% prior to the CPI release. The total easing expected for 2024 fell to around 40 basis points, which is way lower than the Fed’s own projection of 75 basis points. The chance of Fed not cutting at all this year increased to 13%, from 2% a day earlier. [1]

Market Reaction

Stock markets reacted negatively to the hotter-than-expected inflation data, with all major U.S. indexes retreating. Interest rate-sensitive stocks, real estate, and housing sectors were particularly hard hit. Benchmark Treasury yields rose, indicating market concerns about inflation and future Fed actions.

Earnings Season

Investors are also focusing on upcoming corporate earnings reports to gauge the health of companies amid the economic uncertainty. Analysts expect moderate earnings growth in the first quarter, but market sentiment could be influenced by the actual results and forward guidance provided by companies.

Analysts expect aggregate S&P 500 earnings in the first quarter to grow 5.0% from last year, lower than the 7.2% annual earnings growth for the quarter forecasted at the beginning of the year.

A graph of stock market

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Source: TradingView

Technical Analysis

The Nasdaq 100 index has risen 53% in 2023 and is up almost 9% YTD. The price action remains comfortably above its long-term up trend line and the Relative Strength Index (RSI) is firmly in the bull market range. While the large bearish divergence between the price and the RSI indicator warns that internal momentum conditions are deteriorating, we are of the view that subsequent correction are likely to be short-lived and contained above the uptrend line currently crossing at 16,500.

Over the long-term, our view on the tech index remains positive and we favour higher levels by year end. The first potential long-term upside target is 19,500; however, levels to 20,700, which is the 1.618% Fibonacci extension are achievable over time.

Professional investors looking for magnified exposure to the U.S. tech index may consider Leverage Shares +3x Long US Tech 100 or -3x Short US Tech 100 ETPs.

Footnotes:
  1. CME Group / CME FedWatch Tool

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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.

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