A mostly graphical daily curated roundup of the markets and the economy from Nasdaq’s IR team.

a dominant theme over the last 2 years = consistently shifting market narratives | “Markets should continue to find support over the near-term; however, as we move deeper into 2024, the path forward for markets may be bumpier.” -JPM Asset Management | economic + earnings uncertainty partly neutralized by easy money?

“markets are still pricing in a reasonably aggressive pace of rate cuts taking place next year, with an 83% chance of a cut priced in by the March meeting. Moreover, there are now more than 150bps of cuts priced in between the January 2024 and January 2025 meetings, and most of the time we’ve seen that pace of cuts historically, it’s been because of a recession. So there’s now a two-sided risk here…”

-Deutsche Bank

| Last week: the rally of everything led by the real estate sector + Small Caps

* source: Factset, produced by Gavin Zaentz

| easy money: be careful for what you wish for… | “What a week! The move higher in the risk trade last week was impressive.” -Piper Sandler

* source: Piper Sandler

| “Decelerating inflation and Fed easing will keep real yields low and support a P/E multiple greater than 19x…

Since late October, S&P 500 has surged by 15% and Russell 2000 has soared by 23% as real rates plummeted from 2.5% to 1.7%.” -Goldman Sachs Global Investment Research

* source: John Stoltzfus, Oppenheimer Asset Management

* source: Goldman Sachs Global Investment Research

| Looser financial conditions | era of easy money returning? how easy + will inflation return or remain sticky at the very least?

* source: Oxford Economics

| “lack of earnings participation so far in this cycle has limited the move higher in risk equities this year.

On the other hand, catchup trades can last for some time and there are still enormous performance differentials between small and large as nearly half of S&P 600 stocks are still down on the year.” -Piper Sandler

* source: Piper Sandler

* source: Goldman Sachs Global Investment Research

| BofA forecasts 152 global rate cuts in ’24

| 1st year since 2020 cuts to outpace rate hikes

| markets merrily front-running >150bps of Fed cuts in ’24

-BofA’s Michael Harnett, The Flow Show

* source: BofA, Michael Hartnett, The Flow Show

| will easy money improve the IPO market? | economic growth + earnings environment is still uncertain…

* source: Goldman Sachs Global Investment Research

| “A lower cost of capital should also allow stocks with weak balance sheets to “catch up” to the few stocks that have led the market in 2023.” -Goldman Sachs

* source: Goldman Sachs Global Investment Research

| easier money = flirting with inflation?

* source: John Stoltzfus, Oppenheimer Asset Management

1) KEY TAKEAWAYS

1) Equities + TYields + Oil + Gold HIGHER / Dollar LOWER

-Oil jumps: BP becomes latest to pause Red Sea shipments as Houthi attacks continue…

-Fedspeak turns cautious but market does not buy it…

DJ +0.2% S&P500 +0.4% Nasdaq +0.2% R2K +0.6% Cdn TSX +0.6%

Stoxx Europe 600 -0.2% APAC stocks LOWER, 10YR TYield = 3.963%

Dollar LOWER, Gold $2,022, WTI +4%, $74; Brent +4%, $79, Bitcoin $41,560

* source: Goldman Sachs Global Investment Research

VIX Index (equity volatility)

* source: John Stoltzfus, Oppenheimer Asset Management

2) Economic outlook is uncertain but seems to be trending higher or maybe better than expected?

* source: Grindstone Intelligence

* source: JP Morgan Asset Management

3) Other than commodities, nearly everything up this year…

* source: Piper Sandler

4) last week was a great week for Small Caps = catch-up trade…

* source: Piper Sandler

5) Oil prices have been on a downtrend but little changed last week…

* source: John Stoltzfus, Oppenheimer Asset Management

6) Last week: retail sales strong + inflation somewhat sticky and more work needed to bring it down…

* source: John Stoltzfus, Oppenheimer Asset Management

7) “foot traffic is solid at “discount” stores, as consumers try to salvage purchasing power in today’s high price level environment”

* source: Piper Sandler

8) Wage growth still hot but trending lower…

* source: Oxford Economics

10) THIS WEEK:

-US PCE + personal income + spending data will be key

-Inflation reports in the UK + Japan.
-BoJ decision on Tuesday

-Notable earnings include Nike and Micron.

* source: Grindstone Intelligence

2) ESG, COMPILED BY NATHAN GREENE

Wall Street Says Basel 3 ‘Endgame’ Will Upend Climate Finance – BNN

-The Basel 3 Endgame, as the planned rules have been dubbed, marks the final implementation stage in the US of regulations created after the financial crisis of 2008. Banks will need to set aside more capital, which will make it costlier for them to provide finance. 

-“With the incremental capital needed to fund the green transition, banks will look to work alongside other corners of private finance that perhaps aren’t subject to the same regulations… What we’re seeing now in terms of new investment in energy and infrastructure is really a need for how do we crowd in and support institutional investors, given the constraints that commercial banks have under Basel,” – John Greenwood, co-head of Americas structured finance at Goldman.

EU States Off Track for Hitting Climate and Clean Energy Goals – FP

-European Union governments must step up efforts to meet the bloc’s binding goal of reducing emissions by at least 55% this decade, by accelerating the phase-out of fossil fuels and boosting the competitiveness of the clean energy sector in the region.

3) MARKETS, MACRO, CORPORATE NEWS

Fed’s Goolsbee says too early to declare victory over inflation-BBG
ECB governors see no dovish pivot before March, cut before June-RTRS
Hawkish ECB rate-setter says wage ‘slowdown’ key to timing of policy shift-FT
ECB probably at rate peak but too soon to consider cuts, Nagel says-BBG
ECB rate cut bets premature, markets have eased too much: Vasle-RTRS
BOJ likely to keep world’s last negative rate in upcoming decision-BBG
Long-dated treasuries enter bull market as Fed pivot feeds rally-BBG
To trade the Fed’s pivot, wall street turns to short-dated debt-BBG
Goldman strategists lift S&P500 forecast a month after setting it-BBG
Hedge funds turn bearish on dollar, Goldman sees more losses-BBG
US corporate bond issuance seen increasing after yields slide-RTRS
Yen reverses downtrend as policy rates of BOJ & Fed set to move closer-NIKKEI
China’s weak property sector, retail sales keep stimulus calls alive-RTRS
China’s real estate meltdown is battering middle class wealth-BBG
German business expectations fall, dampening hope of rebound-BBG
UK hunts for elusive growth after lost year for the economy-FT
Israel faces protests, new calls for truce after hostage deaths-BBG
UK, Germany and France step up calls for Israel to agree Gaza ceasefire-FT
Putin says he won’t attack NATO as Russia, Ukraine trade drone strikes-BBG
Arab divisions hinder US efforts to counter Houthi ship attacks-BBG
German far-right party makes fresh electoral breakthrough-FT
Congress unlikely to finish work on Ukraine, border deal this year-POL
Congress stares down brutal January-HILL
Epic Games chief concerned Google will ‘get away’ with app store charges-FT
Tokyo Electron: China snapping up its less advanced chip tools-FT
China’s iPhone ban accelerates across government and state firms-BBG
Telefonica mulls bid for Brazil’s Oi broadband fiber clients unit -sources-RTRS
Entain gabmbles on board seat for activist-TIMES
Robinhood woos wealthier clients from bigger brokerages- WSJ-RTRS
Exclusive: Restaurant chain ChuckE.Cheese explores sale, sources say-RTRS
Gildan Activewear ousted CEO after showdown with board-GLO
GSK on hunt for drug deals in China-FT
Dimon’s heir at JPMorgan still hazy as ‘five more years’ tick by-BBG

Oil/Energy Headlines: 1) U.S. Producers Break Annual Oil Production Record-FORBES 2) Goldman cuts 2024 Brent price forecast on strong US supply-RTRS 3) Some Asian refiners mull non-Red Sea routes to bring in North African, Mediterranean crude-PLATTS 4) BP to pause all tanker transits through the Red Sea-BBG 5) US Frackers return to haunt OPEC’s pricing strategy-BBG

Original: Earnings Feed: Markets Not Buying Cautious Fedspeak