- Investors unwilling to fix their wagons to bulls ahead of the FOMC
- Best secular growth stocks are among the worst performers today
- EU Russian oil price cap is working as intended?
MARKETS
US stocks are trading definitively lower Monday as last week’s momentum falters ahead of a big data week.
Another critical Fed meeting looms ominously that may be driving some investors to position for a “higher for longer” rate regime as recession concerns fade, and global growth shows signs of re-accelerating.
Most market participants anticipate that the Fed will slow its pace of tightening to a 25bp rate hike at this week’s meeting, aided by the recently encouraging inflation data. However, the great debate centers on whether or not the Fed will signal that there is a long way to go in the cycle, which has taken sentiment down a peg or two with investors unwilling to fix their wagons to bulls ahead of the FOMC.
This higher-for-longer Fed funds rate regime may be what’s pressuring markets today. Some of the market’s best secular growth stocks are among the worst performers today. Not because there is any news about the prospects for these companies’ technology but because in a world in which rates stay elevated, the value of these business models’ future cash flows erodes.
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OIL MARKETS
Russian oil continues to flow eastbound, which of course, is great news for Central Bankers, broader markets, and Brent Crude short sellers as the resiliency of Russian oil exports indicates that the price cap is working as intended, preventing a surge in oil prices while challenging Moscow’s ability to rake in profits on exports.
Prices overnight are likely influenced by risk reduction ahead of the FED, but China is undoubtedly shaping price discovery; now, investors are anxiously waiting for concrete evidence of how strong the post-reopening recovery will be.
The January 21-27 LNY golden week holiday provided strong consumer signals. Still, investors are keeping things in respect as if there is any “pent-up demand” in the economy; it should be for spending the LNY with family after three years of zero-Covid policy and “staying local” LNY. It is still too early to tell if this is an all-clear signal, but how strongly the broader economy will rebound in the coming months remains top of mind.
Keeping in mind The strong performance in the past few months has come against a backdrop where China’s growth has been soft or mixed at best.
