MORAM - Week in the markets 26th November 2023

The Week in the Markets 20-26th November 2023

It was an atypical week marked by the Thanksgiving holiday, with the American stock market closed on Thursday and open for only half of Friday. The trends observed in the past week (specifically since the American CPI data) continue, with small businesses gaining ground over large ones. Stock markets in developed countries are outperforming emerging markets despite the weakness of the dollar, and energy is the worst-performing sector of the week, albeit still in positive territory.

Energy was the worst-performing sector of the week due to tensions and the OPEC+ meeting delay until November 30th. Some African countries, like Nigeria, are pushing the free rider strategy to the limit, and it remains to be seen if Saudi Arabia will continue to yield or run out of patience. Additionally, economic data is very poor, and in Europe, there is a considerable amount of oil waiting to be unloaded.

Regarding European natural gas, the arrival of cold weather and forecasts for an extremely cold December have boosted TTF in recent days. However, inventories are at 98% (vs. an 85% average over the past 5 years), and the fundamentals remain rather bleak.

High-yield bonds experienced an upward trend on Monday, boosted by strong equity performance and the successful auction of 20-year Treasuries. Yields rose on Germany’s decision to suspend debt limits for a fourth year, coupled with the ECB’s commitment to tight monetary policy. In the UK, the 10-y bond yield went up after an unexpected rise PMI for November.

Also noteworthy are the impressive 3Q23 results of NVIDIA, although it ended lower after issuing cautious guidance due to export restrictions to China. Additionally, the week featured a soap opera between OpenAI and Microsoft (with Microsoft holding a 49% stake in OpenAI). In the end, the OpenAI board will be removed, and Sam (CEO) will return to OpenAI after being employed by Microsoft for just 48 hours. A happy ending for all parties involved.

Bitcoin: On Friday, it reached its annual highs, and we continue to believe that it looks poised to continue its upward trajectory. Short-term catalysts are quite strong (SEC approving the ETF, halving in April, and American elections – everyone knows that politicians think people vote better with some free money). Beta plays two ways.

Macro data

  • Eurozone PMI: The data remains poor – sixth consecutive month of declines – although the pace of contraction is slowing, a recession is imminent. Manufacturing PMI: 43.8, Services PMI: 48.2, Composite PMI: 47.1 (remember that <50 indicates contraction).

  • UK PMI: Surprisingly positive (4 and 5-month highs) Manufacturing PMI: 47.9, Services PMI: 50.5, Composite PMI: 50.1.

  • US PMI: The data is slightly worse than expected but visibly better than in the Eurozone. Manufacturing PMI: 49.4, Services PMI: 50.8, Composite PMI: 50.7.

  • Durable goods orders: Notable 5.4% drop in October, largely attributed to a sharp decline in civilian aircraft orders.

Other events

The elections held in the Netherlands on Wednesday were won by the far-right Geert Wilders, although forming a government may prove challenging. We are closely monitoring the resulting government as a portion of Kistos’ assets are in the Netherlands, and its development will depend significantly on how Natural Gas-friendly the new government proves to be. It’s also worth noting that the Ultraliberal Javier Milei won the elections in Argentina and faces the formidable task of turning around a country with an annual inflation rate of over 140%. In the meantime, Argentine companies have seen significant gains on Wall Street this week.

Finally, we are attaching a small table for you to see the tremendous dependence that sector indicators have (similar to the S&P 500) on a few companies, and why we are showing you other ways to measure sectoral market sentiment in small businesses.

MORAM - ETF Sectors

PD: All Spreadsheets we use are available for subscribers

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