Ouch! I had breakfast with a broker who told me about a friend who invested it all into one stock and then got absolutely hammered even in a bull market. Never mind. Last week was a volatile week for investors but it ended on a bright note. Markets saw a slight pickup in volatility and a mixed performance over the week.
There was plenty of news flow, enough that you might ordinarily have expected a more adverse reaction. Investor sentiment is a complex beast. There are gauges which suggest bullish sentiment amongst some shorter-term investors, but in general, institutions are gradually overcoming their risk aversion.
For the week on Wall Street, the S&P 500 added +1.2% and the tech-heavy Nasdaq climbed +2.3%, lifting all three major stock market averages into positive territory for the year. The fourth-quarter earnings reporting season remained in its early stages, with only 23 companies in the S&P500 expected to release fourth-quarter earnings reports during the week.
“Long Magnificent 7” was the most-crowded trade in BofA’s Global Fund Manager survey. The group’s performance, and the extent to which it’s driving index performance, suggests equities are still running on AI optimism. Those names include Apple, Microsoft, Nvidia, Meta, Netflix, Amazon, and Tesla, and they dominate the technology and communication services sectors.
Stocks in China slumped as the latest indicators underscored the weak outlook for the economy. The Shanghai Composite Index, which is popular among domestic investors, fell -1.72%, its eighth weekly drop in the past nine, according to Bloomberg. The blue chip CSI 300 gave up -0.44%, its ninth weekly drop in the past 10 weeks. In Hong Kong, the benchmark Hang Seng Index plunged -5.76%.
What else? The US dollar’s surge in the first part of the week has given way to consolidation. Most emerging market currencies were slightly firmer. The 10-year US Treasury was flat near 4.14%. Gold tested support at USD2,000 in the middle of the week and is now near USD2,030.
Nobody likes to hear this! On inflationary pressure, shipping costs continue to rise as the Yemeni Houthi rebels attack freights navigating the Red Sea. Conflict has intensified but remains a series of proxy wars rather than a hot Middle Eastern war, which might disrupt oil supply. There seems a reduced path of free navigation of the Suez Canal now that the US and UK launched airstrikes against the Houthis. Freight rates continue to rise.