Following is the market recap on 2023 Dec 5, Tuesday
The JOLTS data today indicates that the U.S. labor market is cooling down, and this week there is also the ADP small non-farm payroll, and on Friday, there is a large non-farm payroll. These are crucial macroeconomic data points before the Federal Reserve’s December interest rate meeting.
In reality, the market has already set the probability of no interest rate hike in December at 97.7%, basically a foregone conclusion.
The trading prices in the bond market are the most sensitive to interest rates. When bond prices rise, market interest rates are actually declining. Recently, bonds have quietly risen, and bond yields have dropped significantly. The ten-year U.S. Treasury yield turned downward after reaching 5% on October 19, and now it has fallen to 4.17%.
Banks are starting to advertise a reduction in fixed mortgage rates, which indicates the cost of long-term funds has indeed decreased.
Next year, interest rate cuts have become the mainstream view of financial institutions. The difference is not whether there will be a cut but rather how much.
Barclays predicts that the Federal Reserve will start cutting interest rates from the second quarter, with a total cut of 100 basis points for the year, followed by another 100 points by 2025, marking several years of an interest rate-cutting cycle.
A gradual interest rate cut is the biggest boon for assets.
2. 1 A gradual interest rate cut will ensure that loose monetary policy continues to inject momentum into the market from the outset. When people expect interest rates to gradually decline in the future and monetary supply becomes increasingly loose, investments will become more active, especially in real estate and stocks.
2.2 However, if the economy suddenly collapses, the Federal Reserve will have to save the stock market through rapid interest rate cuts. A stock market crash is mainly caused by an economic collapse, and pumping money to rescue it will lead to a quick reversal in U.S. stocks.
The monetary policy next year will definitely be looser than this year. 2023 will continue the trend of 2022, which was a year of interest rate hikes, with meetings every 45 days to discuss rate hikes, along with inflation and employment data, jointly suppressing the stock market. However, this problem will not exist in 2024, and news of war will become something everyone is accustomed to, having minimal impact on the stock market. Therefore, next year may be better than this year.
In the long run, U.S. stocks always trend upward, never disappointing.
1. Every time an adjustment ends, U.S. stocks will experience a new wave of upward movement. This is not decided by leading experts but rather because U.S. listed companies have the highest quality globally, with heavyweight stocks having robust moats, enabling them to produce products that others generally cannot.
2. The U.S. economy also has strong resilience, capable of using its own monetary policy and global influence to fix its issues.
3. The overall index of U.S. stocks is constantly evolving, removing old stocks and adding new ones. This ensures that the component stocks of the index consistently maintain profitability and growth.
However, In the short term, there are concerns about a decline in U.S. stocks due to continuous divergence in the KDJ.
1. KDJ is a leading indicator of the index. In the past, once a KDJ top deviation appeared, there would soon be a middle or large bearish candlestick. The positive result is that after a day or two of significant decline, the indicator is quickly repaired, and the upward trend is regained. The negative result might be a continuous adjustment until the end of the year.
2. Only large technology stocks like $Apple(AAPL)$ and $Microsoft(MSFT)$ can influence the index and lead it to quickly repair the top deviation indicator, reversing the short-term bearish trend.
2.1 Apple showed no signs of sudden upward movement today, breaking through the 30 trillion-dollar mark on the platform. 30 trillion is a strategic point that Apple has failed to conquer several times, but after a relentless pullback, it once again surged past 30 trillion.
2.2 Apple is a major holding of Warren Buffett. After Charlie Munger’s departure, the glory of Berkshire Hathaway’s leader is all tied to Apple for a lifetime. As long as the fundamentals do not deteriorate, there will always be someone buying Apple.
2.3 Once Apple surpasses 30 trillion, reaching 197, the ceiling will open up, providing upward space for the second-largest U.S. stock, Microsoft, and creating a relative sense of cheapness for the other five giants, thereby facilitating a rebound.
3. However, U.S. stocks will concentrate their firepower on large-cap stocks, while small-cap stocks remain stuck at the bottom, struggling to boost sentiment.
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