Not so fast says Jerome … (TWTW – Dec 12-16, 2022)

Not a great week for stocks, as the Jerome Powell FED, while following through on the notion the magnitude of the hikes was to decrease (it did … 50 bps) – as amply telegraphed recently – then went on to say that it wasn’t going to be an overnight thing to have inflation return to the 2% goal, and that rates were going to keep heading up until the FED was satisfied we are on track to get there … Ouch …

The market has been on again, off again looking at the notion that a pivot would kick in soon to validate a significant bounce from mid-October, and is going through the motions of having to cope with the realization that we may be stuck with the conditions we are currently operating under for some time … notwithstanding the latest inflation print, which was more favorable than prior readings.

Bottom line – likely the continuation of a range bound market in coming days and weeks, possibly near term with a negative bias due to a combination of ebbing risk tolerance on the one hand, respectively vanishing liquidity as folks get ready for the year-end Holiday celebrations – Merry Christmas, Happy New Year, Everyone 🙂

Didn’t enjoy the past two weeks?

I get that … More fun, of course, was to look at how quickly markets can move up when people chose to opt to look at what 2023 should look like constructively … when not, well, not so much.

In any event – Here are the top and bottom performers across iShares offering, for the month of November, as well as YTD – for perspective:

A key takeaway could be a comment I have come across in the past couple of days, to the effect that we are already in a recession, one that has thus far in 2022 translated into a rotating bear across markets, sectors, etc. One inescapable truth in my opinion, is that the regime change that begun probably mid- 2021 already, looks to be one that has by now taken hold, and may rule the day for the foreseeable future.

Last week’s performance across sectors; thematic; factors; and regions:

  • Canadian tech area – some relative strength relative to US Tech?
  • Materials joining to the downside after recently showing decent strength …
  • Financials – not enjoying the higher rates “risk” … despite benefits to NIM. I guess takeaway is that NIM gains will be more offset by rising problems expected in a recessionary context
  • Financials – given large weighting in broader Canadian index – dragging down the entire index (?)

 

  • Continued relative outperformance of “Fundamentals” and Min Vol this past week, while “Value” hit by large Financials “content” (>50%)

  • Canadian underperformance on account of weakness in financials …

Sector, Thematic, factor, and region – YTD:

  • Leadership intact going into 2023? Energy; Materials; Consumer Staples …

  • Will 2022 go down in history as the worst year for Thematic investing (?)

  • For all the “Bear” talk, Canadian stocks overall have held up relatively well. Will that continue on a relative basis in 2023 given the current backdrop?