Date published - 2023-12-19

(This is a very shortened version highlighting excerpts of our full report which is available for our paid subscribers). 

U.S. stocks ended the week mostly higher after a dovish FED FOMC meeting spurred risk appetite mid-week. The S&P 500 and NASDAQ gained 2.4% and 3% respectively, both pushing for seven consecutive weeks of gains. The Dow Jones Industrial average posted its ninth week of straight gains, up 2.7% for the week. Oracle (-9%) and Adobe (-4%) caught our eye.

Brent crude approached $77 per barrel, aiming for the first weekly gain in two months. Gold held above $2,000 per ounce, driven by a weakened dollar and Treasury yields following the more dovish than expected Fed.

Ahead of the Christmas holidays, we are likely to see limited volumes on the local bourse. The focus and momentum will likely be driven by global markets and developments with some key data releases.

This week's trade ideas look at a pharmaceutical stock and a global entertainment play

Some SA company highlights last week:

South African stocks enjoyed the global rally with gains across all sectors last week, led by property and financial stocks. The company calendar was a lot lighter in what was a shortened trading week. The rand was stronger, muting gains for South African investors in global markets. There were numbers and announcements out from Thungela (+1.7%), Jubilee Metals (+25%), and MAS Real Estate (-7.5%).

Economic:

The US Federal Reserve (Fed) set the proverbial cat amongst the pigeons last week with an announcement that was considerably more dovish than expected by the market. The FOMC maintained the fed funds rate at 5.25%-5.5% for the third consecutive meeting in December 2023 as expected but the surprise came in the outlook. Our full report looks at what the 'Dot Plot' told us as well as the expectations on growth. We also look at the latest US CPI print and retail sales. In line with the FED, we also saw the ECB and BOE keep policy rates on hold.

The Chinese data shows us an economic cycle that appears to be running ‘out of sync’ with other major economies.

In South Africa, mining production rebounded by a significant 3.9% YoY, and Manufacturing production rose by 2.1% YoY in October, recovering from the previous month's 4.1% slump but headwinds persist. CPI eased to 5.5% in November, marginally below market expectations and down from 5.9% in October. Our full report looks at some of the drivers behind these numbers.

Our Market's and Risk view:

Our risk indicators have now accelerated from 'Greed' to 'Extreme Greed' territory signalling a significant concern and caution. Thus far, we have mantained our risk positions but given the tail end of the Santa Claus rally we discussed two weeks ago as well as the recent escalation into 'Extreme Greed', we would not hesitate to take profit and set tight stop losses in the event of any signs of a correction on shorter term charts and indicators. Looking at an assortment of Macrotech risk indicators (Corporate clients can contact us for more detail), capital market risk indicators are now in line with the highs seen in February and July 2023. Extreme caution is warranted as both periods saw significant drawdowns (10-15%) following a near term market top.

For the week ahead:

SA: Leading Business Cycle indicator

US: US housing, GDP, spending and income as well as some sentiment indicators along with PCE inflation (the Fed’s preferred measure of prices).

China: Prime Loan rate

Global: Bank of Japan decision, Japanese trade and inflation, Eurozone and UK inflation and UK GDP.

Our full report unpacks all of this in more detail as well as their implications for the markets.

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