Nasdaq Markets Outlook

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

#marketseverywhere | “While you may put whatever price you wish on the goods or services you provide, those prices will become economic realities only if others are willing to pay them.”

-Thomas Sowell, American Economist

| Yesterday's sell-off | "growing scepticism about the chance of near-term rate cuts" -Deutsche Bank | ECB + Fed's March rate cut odds dialed back | market throws a tantrum when it doesn't get what it wants... | "January rout in megacap tech is now consensus" -BofA

| Q4 2023 - a reversal | "For most of the year, leadership across size and style boxes was fairly linear, with larger and growthier stocks outpacing smaller and more value-oriented areas. In the fourth quarter, we saw a dramatic reversal and catch-up trade where small value clawed back some relative performance and narrowed the 2023 gap. In fact, the R2K went from 52-week low to high at a record pace." -Piper Sandler

* source: Piper Sandler

| Low unemployment rate but job gains not coming mostly from productive sector | "Drill into the nation’s 3.7% unemployment rate...government, social assistance and healthcare account for 56% of the 2.8 million net new jobs over the past year..." -Allysia Finley writing for WSJ

1) KEY TAKEAWAYS

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

-busy macro week (jobs data Fri) + FedSpeak

-Red Sea + Houthis/Iran = geopolitical tensions rise

"equities, credit and bonds all advanced after their losses in 2022, and there were massive gains for the Magnificent 7, which saw a total return of +107% last year." -Deutsche Bank

* source: Piper Sandler

DJ -0.4% S&P500 -0.5% Nasdaq -0.5% R2K -1.4% Cdn TSX -0.6%

Stoxx Europe 600 -1.0% APAC stocks LOWER, 10YR TYield = 3.982%

Dollar HIGHER, Gold $2,038, WTI +2%, $72; Brent +2%, $77, Bitcoin $42,250

2) Key themes from Piper Sandler...

* source: Piper Sandler

3) Best + worst S&P 500 index return contributors and performing stocks in 2023

* source: Goldman Sachs Global Investment Research

4) 2024 = aggressive rate cuts priced in by the market | and how will various assets behave if the Fed does not meet market's expectations?

* source: Deutsche Bank

* source: Goldman Sachs Global Investment Research

A handful of banks have started loosening monetary policy, and it looks like they’ll be joined this year by the Fed, ECB, BOE, and BOJ.

* source: Grindstone Intelligence

5) will equities meaningfully break above their 2022 highs? | the rally has so far been on valuation (P/E) expansion and not earnings growth...

* source: BofA's Savita

* source: Grindstone Intelligence

* source: Yardeni Research

Growth vs Value

* source: Grindstone Intelligence

6) Falling credit spreads | Credit markets certainly don't seem to be pricing in a recession unless their signals are blunted by a return to easy money...

* source: Grindstone Intelligence

7) "Inflation is taxation without legislation." -Milton Friedman | Turkish inflation climbs to nearly 65%, with more rises expected

* source: CNBC

8) #QualityMatters | Growth > Value | SMIDs rally end of year...

* source: BofA's Savita

* source: Goldman Sachs Global Investment Research

9) JPMorgan AM's thought of the week...

"Despite recession fears stoked by tight monetary policy, banking sector hiccups and elevated geopolitical tensions, all asset classes, save one, experienced positive returns."

* source: JPMorgan AM

10) from Goldman's "top 10 charts of 2023"

2024 - hard landing, soft landing, or no landing?

disinflation, note - there is still inflation, just less of it...

* source: Goldman Sachs Global Investment Research

11) A key theme of 2024 is where will the economy go? and if performs better than expected then rate cuts may not kick in as aggressively, and then what happens?

* source: Piper Sandler

12) Themes by JPM AM...

* source: JPMorgan AM

13) Busy week for macro data with Friday's job report perhaps the most important...

* source: Grindstone Intelligence

2) ESG, COMPILED BY NATHAN GREENE

‘Transition Finance’ Takes Center Stage in 2024 - BNN

-There’s a “whole world of transition finance being created as we speak,” said Mark Carney, the United Nations special envoy on climate action and finance, during a panel discussion at last month’s COP28 in Dubai.

-The conversation has “matured from talking about investing in climate to investing in transition,” said Annika Brouwer, a sustainability specialist at Ninety One Ltd. At least half of the South African asset manager’s engagements in Dubai focused on transition finance for emerging markets, she said.

European ESG funds face fossil fuel showdown after French ruling - FT

-Pan-European funds claiming to invest on an environmental, social and governance basis may need to sell all their fossil fuel holdings following a ruling by the French government. The move could lead to billions of euros worth of forced divestments over the course of 2024. 

-France has ruled that funds operating under its “socially responsible” ISR label will, from the start of 2025, be barred from investing in any companies that launch new hydrocarbon exploration, exploitation or refining projects. Companies that exploit coal or “unconventional” hydrocarbons will also be off limits.

3) MARKETS, MACRO, CORPORATE NEWS

• Stocks, bonds drop in tandem for worst start to year in decades-BBG
• Maersk decides the Red Sea is too unsafe for its ships for now-BBG
• US construction on solid ground; manufacturing under pressure-RTRS
• More big companies set to collapse in 2024, industry experts warn-PM
• German labor market remains resilient despite growth struggles-BBG
• Fed’s balance sheet leaps into spotlight after repo volatility-BBG
• UK executives urge BOE to cut rates after confidence sinks lower-BBG
• Israel-Hamas War: Blast in Beirut kills Senior Hamas leader-NYT
• Iran’s Red Sea power play raises fears of trade disruption-BBG
• Exclusive: China removes official after video games rules spark turmoil-RTRS
• China New Year holiday travelers reach pre-COVID levels-BBG
• China's top banks tighten exposure to smaller peers to curb credit risk-RTRS
• China injects $50 billion into policy banks in stimulus push-BBG

• Airbus confirms offer worth up to €1.8bn for Atos cyber security unit-FT
• Ackman's hedge fund Pershing Square gains 26.7% in 2023-RTRS
• Sumitomo may exit Samvardhana Motherson, hires banker for Rs10,000-MC
• China's bubble tea makers Mixue and Guming apply for Hong Kong IPO-RTRS
• Carrier CEO eyes quick sale of industrial alarm business-BBG
• US profit growth to accelerate in 2024 despite economy risks-RTRS
• Tesla reported 485,000 deliveries, bringing 2023 total to 1.8 million-CNBC
• Fidelity’s X stake fell 72% in value since Musk buy-BBG
• US companies dive into convertible debt to hold down interest costs-FT 

Oil/Energy Headlines: 1) Oil’s ample supply has analysts predicting tough year for crude-BBG 2) Gas prices fall under 3 bucks a gallon at majority of U.S. stations-CBS 3) OPEC+ plans oil market monitoring meeting in early February after fresh output cuts start-BBG 4) US becomes top LNG exporter after overtaking Australia and Qatar-BBG 5) Saudi Arabia may cut Feb Arab Light price premium to one-year low-RTRS 6) China crude flows to storage poised to pick up after half-year lull: Russell-RTRS 7) FUJAIRAH DATA: Oil product stocks rise after 16% annual drop-PLATTS 8) Mounting geopolitical risks make oil storage expansion imperative for India-PLATTS 9) India says Russian oil import drop not due to payment challenges-BBG 10) Commodities 2024: Mexico's oil and gas upstream activity likely to slow as country votes for new president-PLATTS 11) Chevron warns ‘harsh’ California policies harm earnings and investment-FT 12) Russia’s seaborne crude exports surge to end 2023 on a high-BBG