Date published -2023-09-26
(This is a very shortened version highlighting excerpts of our full report which is available for our paid subscribers).
This was a week where a more hawkish than expected Fed brought the bull market to its knees. Indeed, inspiration for our cover image (a new addition at the request of a subscriber) - picture is worth a thousand words and suitably with alot of red this week.
In the past week, all three major US stock indices ended on a negative note as traders grappled with concerns about prolonged elevated interest rates after a more hawkish than expected Federal Reserve comment (see Economic section). The Dow Jones declined by 1.7%, while the S&P 500 and the Nasdaq experienced more significant losses of 2.8% and 3.6%, respectively. Losses were widespread across all major sub-sectors. Tesla fell 10% after a strong rally in the preceding week on the back of developments in the labor negotiations in the sector. Additionally, Ford outperformed its peers amid reports of progress in negotiations with the United Auto Workers, while labor strikes against General Motors and Stellantis expanded.
The Rand strengthened against major currencies like the US Dollar, Euro, and Pound. In commodities, while gold showed a slight increase, oil prices declined by -2.13% after several weeks of remarkably bullish momentum. This aligns perfectly with our previous and current analysis on Brent Crude as included in the Market Carousel - our feature chart this week.
Economic:
The Fed undoubtedly drove the largest market impact with the ‘surprise’ coming less from the policy move than from the guidance and projection of policy officials. The federal funds rate was held at 5.25%-5.5%. However, policy makers forecasts showed that rates were expected to be higher within the next year before tailing off, hinting at the possibility of another rate hike this year. Even in the carnage, we have found the following opportunistic trades...
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