Stocks rallied again last week. Can momentum continue?

Last Week's Market Review (and a look ahead to this week).

The STOXX Europe 600 Index advanced for a fourth consecutive week, ending 1.30% higher. 

Stocks appeared to receive a lift from expectations that central banks could cut interest rates next year due to slowing inflation and signs that European economies have been faltering.

Major stock indexes rose as well. France’s CAC 40 Index climbed 2.46%, Germany’s DAX gained 2.21%, and Italy’s FTSE MIB added 1.59%.

In the UK the FTSE 100 Index lagged once again adding only 0.33%.

European government bond yields broadly ended lower as comments by some European Central Bank (ECB) policymakers fuelled hopes that rate reductions could come sometime in the first half of 2024. The yield on the benchmark 10-year German bond slid toward its lowest levels so far this year. Italian government bond yields also declined.

In the UK, the 10-year government bond yield fell to below 4% for the first time since mid-May on expectations that the Bank of England could start cutting borrowing costs by mid-2024.

Activity in the UK’s construction sector fell sharply for a third month in a row in November due to a continued slump in homebuilding, according to a Purchasing Managers’ Index compiled by S&P Global and the Chartered Institute of Purchasing and Supply.

German industrial output fell for a fifth consecutive month in October, sliding 0.4% sequentially, which was more of a contraction than the 0.2% increase called for in one consensus estimate. Factory orders unexpectedly slumped, dropping 3.7%. Meanwhile, the jobless rate rose to 5.9% in November, the highest level since May 2021.

In the US a late rally helped the major indexes end flat to modestly higher for the week. The small-cap Russell 2000 Index outperformed the S&P 500 Index for the third time in the past four weeks, helping narrow its significant underperformance for the year-to-date period.

Growth stocks built modestly on their lead over value shares, however. Within the S&P 500, energy stocks lagged as domestic oil prices fell below USD 70 per barrel for the first time since June.

The unemployment rate surprised by falling back to 3.7% from a two-year high of 3.9% in October. Average hourly earnings rose 0.4%, above expectations, but the year-over-year increase remained at a consensus 4.0%.

On Tuesday, data from both S&P Global and the Institute for Supply Management showed a modest pickup in services sector activity in November, but the Labor Department’s count of October job openings fell much more than expected to 8.73 million, the lowest level since March 2021. October factory orders, which were reported on Monday, also fell more than expected.

Japan’s stock markets lost ground over the week, with the Nikkei 225 Index falling 3.4% and the broader TOPIX Index down 2.4%. Comments by Bank of Japan (BoJ) officials stoked speculation that the central bank may abandon its policy of negative interest rates earlier than anticipated, weighing on riskier assets. Equities came under further pressure as data showed that Japan’s economy contracted by more than initially estimated in the third quarter of the year.

Amid perceived BoJ hawkishness, the yield on the 10-year Japanese government bond (JGB) rose to 0.77%, from 0.71% at the end of the previous week. A notably weaker-than-expected 30-year JGB auction was another factor that pushed yields higher.

Chinese equities fell after a credit downgrade on China’s sovereign debt by Moody’s underscored worries about its economic outlook. The Shanghai Composite Index declined 2.05%, while the blue-chip CSI 300 gave up 2.4% after falling midweek to its lowest level in nearly five years. In Hong Kong, the benchmark Hang Seng Index fell 2.95%, according to FactSet.

Moody’s cut its outlook for China’s government bonds to "negative" from "stable" on Tuesday, saying that the country’s debt-laden local governments and state firms posed downside risks to the economy. The ratings cut from the U.S. credit agency was the latest setback for financial markets in China, which is grappling with a yearslong property market downturn and flagging consumer and business confidence. In response, Beijing issued a flurry of pro-growth measures this year to shore up demand, although analysts say the measures have been insufficient to revive the economy.

What’s coming up this week?

It’s going to be a busy week with interest rate decisions from the US Fed, The European Central Bank and The Bank of England.

Expectations are that all 3 will hold this month and await further data on inflation.

With that in mind, we do have US inflation on Monday. The month-over-month figure is expected to come out at 0% again, following the same number last month. Obviously, the more months which see no inflation at all, the sooner the US will hit the 2% target.

On Wednesday we’ll see GDP numbers for the UK. The monthly data here will come in around 0% with the overall consensus looking for -0.1%. We know that GDP is running fairly flat at the moment, so this is unlikely to shock the market.

Then we’ll finish the week with US and Chinese retail sales figures. The year-over-year expectations for Chinese sales are quite high at 12.5% up from 7.6% last month. This will be the 11th consecutive month of growth in retail turnover.

It’s going to be a busy one as firms will then start to wind down for the holiday period. We aren’t expecting any major surprises but keep an eye on the US inflation numbers as anything positive might throw a cat amongst the doves (sorry).

Leader Board - Top Trading Strategy

Closing Comments:

The majority of TPP strategies are having a short term period of underperformance over the last 4-5 weeks as many have been speculating on a fall in global equities.

It hasn't happened as of yet, and it will be interesting to see if it is a stance they'll stick with.

We don't have many poor months, but November was one.

Some of our 'trackers' and 'long or flats' posted positive returns but most of our active strategies are positioned for a market sell off.

We use multiple tactics to beat the market benchmarks, and one of those tactics is to occasionally 'short sell' the market. When it works well it really separates TPP from the crowd, but it is a trade that is hard to time. As of right now- we're on the wrong side of the trend.

It does seem that opinion is split in the markets at the moment. Can stocks and particularly tech stocks continue to rally, or will we witness a reversal like our traders have been anticipating?

Timing a short sell trade is always a challenge, but it's one we get right often.

The reason why it's hard, is because traditionally markets increase in value. You're swimming against the tide. However, when you do get it right- it's very satisfying making money as wealth managers globally post negative returns.

Regardless of which direction the economy (or markets) moves from here, TPP will aim to take advantage.

We hope that by building products like TPP that investors will see there are investment solutions out there that can perform regardless of the investment climate.

Why merely track a market, when opportunities can be taken advantage of in the short and mid term?

Adding small short SELL positions as the markets fall is one of many ways our strategies make modifications to consistently beat the markets.

If you're frustrated with what many believe is a stale and outdated wealth management model- then consider arranging a call with our team.

We are also of the opinion that the industry needs revamped, and that wealth and asset managers have no excuses for failing to beat their benchmarks most years.

Investors want more than 4, 5, or 6% per annum, without taking on excessive risk.

Investors are frustrated with the poor performance and excessive fees.

Ladies/Gents - this is the very reason why we built TPP.

TPP has been built for frustrated investors globally. It's time to empower yourself, and start to beat your benchmark. At TPP we offer a multitude of different strategies and trading techniques- they all have one thing in common. They are all designed to beat their market benchmark. Their track records suggest they will do exactly that. It's time for change. No more exposure to underperforming funds, and their inflated fees.

TPP has been built to disrupt the market place and offer investors the solution they've been craving. Welcome to the future of investing. 😀