Assets sought quality and stability during a volatile week. Traders dealt with some of the largest intraday reversals in years. The S&P ending the week up around 0.8% obscures the wide ranges of nearly 5% in each day’s trading. Welcome to your weekend edition of Launch Conditions from GoNoGo Research.
There was no shortage of narrative to explain the moves this week either. Chairman Powell and the FOMC met Tuesday and Wednesday to discuss the strength of the US Economy and the need to respond to high inflation risks. Accordingly, the 2-yr yield rose 18 basis points to 1.17%, and the U.S. Dollar Index rose 1.7% to 97.24 in anticipation of five rate hikes beginning in March.
In addition, Q4 reporting is well underway as listed companies largely announced better-than-expected earnings reports. But, as any market analyst can tell you, the market decides where prices will trade, not estimates of fundamental valuation. Another clear illustration this week was the 10% drop in $TSLA shares after the company beat earnings estimates!
Rather than succumb to the yo-yo of financial media’s 24 hr news cycle, the chart pack below will provide perspective on the trends across asset classes and global markets. Take a minute to review your Launch Conditions chart pack to see the bigger picture trends:
As GoNoGo Research has shared since the start of the year, assets have been flowing out of risk assets and into pockets of the market that provide a store of value. Capital-intensive companies such as oil and gas exploration, drilling, and refinery have become attractive to investors. Recession-resistant sectors such as grocery, CPG, and other consumer staples are catching the bid. Of the US equity indices, the Dow Jones Industrial Average outperformed with a 1.3% gain this week. Many blue-chip companies posted decent gains amid the heightened market volatility such as Visa (V), Johnson & Johnson (JNJ), American Express (AXP), Apple (AAPL), Microsoft (MSFT), IBM (IBM), and Dow Inc. (DOW).
