The Week Reviewed

A solid week but does it have the legs to continue ?

We think last week was most likely funds positioning themselves for the year ahead. European stocks had a nice rally and the US made the most of a good Friday but is it just laziness?

Wealth managers holding too much cash from last year will no doubt buy now, then sit back and do very little for the rest of the year.

US stocks had their best day in more than a month Friday as traders speculated that a slowdown in wage growth will keep the Federal Reserve from having to intensify its battle against inflation. Treasuries also rallied and the dollar dropped.

The S&P 500 jumped more than 2% to salvage the first weekly advance in the past five, while the Nasdaq 100 rose 0.9% in the four days. The dollar suffered its longest streak of weekly losses in two months as cooler wage growth outweighed an otherwise solid jobs report to fuel expectations the Fed will slow its pace of rate hikes.

Treasuries advanced Friday, with sharp declines in short-term yields where the policy-sensitive, two-year rate fell the most this week since November. This could very well be wishful thinking from US traders and it wouldn’t be the first time in the last few months they’ve called it wrong.

The eagerly anticipated December jobs report failed to offer a clear picture of the state of the American labour market, especially since it came a day after two jobs readings signalled continued tightness. Hiring exceeded estimates for the month and unemployment fell to the lowest in decades. Traders continued to mull how that strength contrasts with the weaker gains in hourly wages and what that means for Fed policy ahead. A reading on consumer prices is due next week.

“A new 53-year low in the unemployment rate is a real problem, suggesting the Fed made zero progress toward relieving labour market strain in 2022,” wrote Chris Low, chief economist at FHN Financial. “But the combination of the downward revision to November average hourly earnings and a lower-than-expected December rise buys the FOMC more time.”

Recent data only complicates the central bank’s task and creates uncertainty for traders. Kansas City Fed’s Esther George, on Friday, warned that officials will have a tough road ahead as they attempt to balance inflation and employment. Other Fed officials have also continued to be hawkish, saying that while data has been encouraging and inflation is easing, the central bank still has more work to do.

An underlying gauge of euro-zone inflation flared to a record last month, indicating persistent price pressures that will likely extend the European Central Bank’s most-aggressive bout of interest-rate hikes in its history.

Stripping out food and energy prices, so-called core inflation rose to an all-time high of 5.2% in December. Slower growth in energy costs was the only reason for the moderation in the overall annual figure, which fell below 10% for the first time in four months.

In the US, robust hiring and a cooling in wage growth raised hopes that the Federal Reserve can tame inflation without triggering a surge in unemployment.

The jobless rate fell last month to match a five-decade low.

Euro-area inflation returned to single digits for the first time since August, fuelling hopes that the bloc’s worst-ever spike in consumer prices has peaked.

December’s reading came in at 9.2%. Highlighting how inflation continues to menace Europe’s economy, however, a measure of underlying price pressures that strips out energy and food edged up to a record 5.2%.

The fact that core inflation remains so strong means that the European Central Bank is unlikely to slow rate rising for a while longer. It was a solid week for stocks but things will probably cool from here.

With stocks up and most of our traders long, this was a good week.

CAC long or flat: 6.9%

FTSE x3 Tracker: 6.1%

SP500 Trader: 4.3%

Cambridge Futures: 3.8%

European Index: 3.6%

FTSE MKT Trader: 3.4%

Most have now sold out of the long positions. One or two are short, and the rest looking for a drop. The reason to have a tracker in your portfolio is to make sure that if the drop doesn’t come, you still make money.

The point of a portfolio is to make money. Not to just let it sit somewhere ticking over.

In 2023- A rising market, or one that trades in ranges would both be very good climates for our traders. Although most investments stagnate in ranging markets, on our platform our traders have a habit of buying at short term lows, and taking profit at short term highs. Therefore, whether the market stagnates within a tight range, or rises moving forward- we hope our traders and trading teams take advantage for our clientele.


If you have an underperforming portfolio elsewhere, or are sitting in cash waiting for an entry point- contact our team for a FREE consultation. Learn how to build a portfolio that aims to yield 2-4 x market benchmark performance per annum.

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