Federal Reserve

Nasdaq Markets Outlook

Attention on Rate Cut Odds in 2024

A mostly graphical daily curated roundup of the markets and the economy from Nasdaq's IR team.

#marketseverywhere | MSCI quarterly review as of close Nov. 30, 2023. Expect elevated volumes/volatility particularly at the open and close leading up to and on the rebalancing date

| market hanging on to every word/action of Fed | Fedspeak 1) Bowman favors hiking rates if inflation progress stalls; 2) Waller: "If inflation constantly declines, there is no reason to insist in really high rates" 

markets pricing in rate cuts in 2024 w/ Fed being the most aggressive across main global central banks | dollar falling / gold rising...

Fed Policy Rate

* source: Nasdaq Economics Team, Michael Normyle

chart 4

* source: Oxford Economics

odds of us

* source: CME FedWatch, created by Nasdaq's Gavin Zaentz

| Global bond yields are off recent highs as a result...

chart 5

* source: Oxford Economics

| and then this happened but with yields stabilizing will performance improve?

figure 3

* source: JP Morgan

| Money supply tightening...

chart 2

* source: Oxford Economics

| earnings are key! | "Over the past year, EPS momentum stabilized and that helped equity multiples recover. If earnings revisions falter again from here, P/Es could as well, and that is despite falling bond yields."

-JP Morgan

figure 20

| earnings are key & at risk? | "Historically, there was a strong positive correlation between earnings growth and PPIs. As PPIs turn negative, earnings tended to, as well."

figure 14

* source: JP Morgan

| "markets cheaper but not cheap" | dichotomy between mega-cap growth & all others...

s&p

* source: JPMorgan AM

| Slight improvement w/ consumer confidence + expectations as a result of easing inflation...

consumers confidant

* source: Oxford Economics

| "Falling rates have prompted short covering and real money buying of equities. Rally looks exhausted, but overall equity exposure is only about neutral and cash holdings are high. Although a soft landing feels consensus, poor MF returns in Nov suggest positioning is defensive and pain trade remains to the upside into '24." 

-Barclays' Emmanuel Cau

figure 3
figure 4
figure 13
figure 17
figure 31

* source: Barclays' Emmanuel Cau

| Big becoming bigger as focus remains on mega caps in this tricky market environment and investors have been tilting towards #QualityMatters

weight

* source: JP Morgan AM

| Price stability is a desirable thing...

world container price

* source: JP Morgan

1) KEY TAKEAWAYS

1) Equities + Dollar + Gold + Oil HIGHER / TYields LOWER

Powell speaking on Friday... 

U.S. GDP grew at a 5.2% rate in the third quarter, even stronger than first indicated (better than expected business investment and stronger government spending +5.5%) -CNBC

Corporate insiders snapping up shares of their own firms, a signal market rally has room to run -BBG

Themes: Elevated cash remains on the sidelines ($5.7 trillion parked in cash-like money-market funds ) | Volatility (VIX) continues to fall | has rally peaked after short covering in recent week? = major averages hitting resistance levels | Signs point to the beginning of consumer weakness | Investors are getting back in the market - Invesco’s QQQ ETF, which tracks the tech-heavy Nasdaq-100 Index, reported its largest weekly inflow in history the week of Nov. 13. | Small-cap stocks have trailed Large caps this year by a historic margin | Upcoming catalysts: November employment data on 8-Dec, CPI on 12-Dec, and the FOMC decision (and updated dot plot) on 13-Dec. 

-By Shon Wilk

DJ +0.3% S&P500 +0.6% Nasdaq +0.9% R2K +1.7% Cdn TSX +0.2%

Stoxx Europe 600 +0.5% APAC stocks LOWER, 10YR TYield = 4.267%

Dollar HIGHER, Gold $2,044, WTI +0%, $77; Brent +0%, $81, Bitcoin $37,850

real gdp growth

* source: Oxford Economics

2) Weekly Nasdaq Investor Flows by Bill Bailey

Institutional investors continue to resist participating in any part of this latest rally/market strength | taking risk off in the technology sector

Hedge funds = sellers of equities moving out of Technology, Health and Consumer Non-Cyclicals sectors 

Retail traders followed suit as they rotated out of Financials, Utilities and Health sectors 

Index funds continue to be net buyers of equities with concentrated activity in the Technology + Health sectors.

nasdaq aggregated asset flows
one week flows

* source: Nasdaq Investor Flows

3) THIS WEEK: 

"US growth dynamics will be in focus next week with releases including personal
income and spending data as well as the ISM manufacturing index. 

In Europe, all eyes will be on the preliminary CPI reports for November. There will also be economic activity indicators in Japan and the PMIs in China. 

Central bank speakers include Fed Chair Powell, ECB President Lagarde and BoE
Governor Bailey. 

Notable corporate earnings include Dell and Salesforce" 

.-Deutsche Bank

key events

* source: Barclays' Emmanuel Cau

2) ESG, COMPILED BY NATHAN GREENE

OFF THIS WEEK

3) MARKETS, MACRO, CORPORATE NEWS

  • Fed’s Waller, Bowman open door to another interest rate pause December-BBG
  • Inflation falls mask bumps on the ‘last mile’ for central banks-FT
  • New Zealand mulls another rate hike as inflation risks persist-BBG
  • Bank of Japan's paper loss on JGB holdings grows to record $71bn-NIKKEI
  • Chinese-style quantitative easing emerges as property fix option-BBG
  • Bank of Korea to hold as investors look to 2024-BBG
  • Bill Ackman bets Fed will cut interest rates as soon as first quarter-BBG
  • Everywhere you look, rates traders are piling into rate-cut bets-BBG
  • German shares touch 4-month highs on signs of easing inflation-RTRS
  • Spain's 12-month inflation falls to 3.2% in November-RTRS
  • Australia’s inflation cools, boosting case for rate pause-BBG
  • Israel, Hamas seek new deal to extend Gaza truce on final day-RTRS
  • Ukraine war updates: Finland to close entire border with Russia-CNBC
  • House prepares to drop China investment curbs from defense bill-BBG 
  • Okta says hackers stole data for all customer support users-BBG
  • OpenAI isn’t expected to offer Microsoft, other investors a board seat-INFO
  • Mark Cuban to sell majority stake in Mavericks to Miriam Adelson-ATH
  • Apple offers exit ramp to Goldman for troubled card accord-BBG
  • Illumina CFO says there's outside interest Grail as 'outright sale' explored-END
  • Daniel Křetínský pushes French retailer Casino offload stores before bailout-FT
  • Permira selects banks for Golden Goose IPO-FT
  • Japan’s NTT Docomo joins Mitsui-led group in Edotco bidding-BBG
  • US weighing reprieve for automakers on electric vehicle tax credits-BBG
  • Corporate America has dodged the damage of high rates. For now.-NYT
  • Amazon announces Q, an AI chatbot for businesses-CNBC
  • 3M, DuPont defeat massive class action over forever chemicals-RTRS
  • Goldman Sachs pares back ‘growth at all costs’ China strategy-FT
  • Micron slides after warning that operating costs are growing-BBG
  • Lineage Logistics eyes over $30 billion valuation in IPO-BBG 

Oil/Energy Headlines: 1) OPEC+ talks continue, no meeting delay currently expected, sources say-RTRS 2) Black Sea storm disrupts Russian and Kazakh oil exports-RTRS 3) Investors bet against OPEC+ raising oil prices-RTRS 4) Russia says bad weather still disrupting Black Sea oil exports-RTRS 5) FUJAIRAH DATA: Oil product stocks drop to two-week low-PLATTS 6) India's reemergence for Venezuelan crude opens new battleground for China-PLATTS 7) Chinese oil refiners spend heavily to tap clean energy boom-BBG

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Massud Ghaussy, CFA

About the author

Massud Ghaussy, CFA, is part of Nasdaq's IR Insights team and delivers daily insights that empowers readers to get a sense of the important issues impacting the day's trading.

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