The weekly market reports include a market position update, a stock market forecast, and an analysis of capital markets. To access the full report, you must subscribe to Premium Articles, Weekly Premium Articles, or an All-in-One subscription.
Included in this report:
- Year-to-date performance
- Weekly summary.
- Update on market positioning.
- Stock market forecast.
- Capital markets update.
1. Year-to-date performance
We use two cross-sectional momentum long-only strategies to generate signals for capital markets and factor ETFs. See Section 3 below for more details, open positions, and signal updates.
Year-to-date, the weekly report strategies are up 24.4% (equal allocation, no leverage) versus a gain of 21.3% for the SPY ETF. Despite the strong correlation between the two strategies and the market (SPY) this year, a brief period of outperformance in early April of this year accounts for the higher return. Note that the strategy’s beta over the last 10 years is approximately 0.45.
2. Weekly Summary (September 16–September 20, 2024)
- Stocks rose after better-than-expected inflation data.
- Large-cap stocks (SPY) gained 0.6% to new all-time highs.
- Long-duration bonds (TLT) fell 0.3%, due to worries that a new round of stimulus by central banks could reignite inflation.
- Commodities (DBC) gained 0.5% after gains in softs, grains, and precious metals.
- The US dollar index (UUP) ended the week slightly down.
- Gold (GLD) gained 1.2% to new all-time highs.
- Since January 3, 2022, bonds (TLT) have been down 27.7%, while gold and large-caps (SPY) have gained 43.3% and 25.3%, respectively.
- For the week, the equally weighted magnificent seven stocks index gained 1.7%. TSLA surged 9.3% and NVDA gained 4.7% for the week.
- The materials sector (XLB) gained the most this week, by 3.5%. The health care sector (XLV) fell 1.1%.
Stimulus
China announced an aggressive stimulus package of 2 trillion yuan to boost its economy. One interpretation is that the Chinese move came late. Our interpretation is that this is a sign of a new round of stimulus to follow by central banks around the world, including the Fed, in the form of quantitative easing, and probably by governments in the form of money printing.
The iShares China Large-cap ETF (FXI) surged 18.5% on the week, and the 5-day volume was over half a billion shares!
The London Metal Exchange Index surged 5.9% on the week, as the stimulus was seen as bullish for commodities. This index tracks the prices of copper, aluminum, lead, tin, zinc, and nickel.
The question here is not whether inflation will rise due to stimulus packages, but how much. The bond market did not like these developments, and the TLT ETF fell slightly on the week, despite favorable inflation numbers.
In addition to stimulating the economy, the Chinese move may also have geopolitical implications. However, it is too early to speculate on these aspects. However, if China proceeds with additional fiscal stimulus, volatility in the capital markets will increase. In the event of an inflation uptick, bond losses may accelerate and commodities will gain, but the direction of the stock market is uncertain.
3. Update on market positioning
We use two cross-sectional momentum long-only strategies that generate signals for capital markets and factor ETFs.
Last update: Friday, September 27, 2024, after the market close. The year-to-date performance is 24.4%.
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Specific disclaimer: This report includes charts that may reference price levels. If market conditions change the price levels or any analysis based on them, we may not update the charts. All charts in this report are for informational purposes only. See the disclaimer for more information.
Disclaimer: The Weekly Market Reports are provided for informational purposes only and do not constitute investment advice or actionable content. We do not warrant the accuracy, completeness, fitness, or timeliness for any particular purposes of the Weekly Market Reports. Under no circumstances should the Weekly Market Reports be treated as financial advice. The author of this website is not a registered financial adviser. Before subscribing, please read our Disclaimer and Terms and Conditions.
Charting and backtesting program: Amibroker. Data provider: Norgate Data
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