With US markets closed Thursday for Thanksgiving and open only a half day Friday, most of the action in global financial markets occurred in the first three days of the week. The shortened week didn’t break the winning streak in US equities, with the S&P 500 and the DJIA both closing on Friday at all-time record highs. In fact, November was the best month of the year for the S&P 500 (+5.7% MoM), the DJIA (+7.5%) and the Russell 2000 (+10.8%), all registering solid gains following losses in October. The US Treasury market also settled down, as yields declined sharply across the maturity spectrum. Investors in long duration bonds racked up solid gains for the week. Economic data released last week in the U.S. was sparse but in general continued to support a “Goldilocks economy”, with PCE for October (released Weds) more or less in line with consensus. The minutes from the last FOMC meeting in early November were also released with no surprises. Expectations are two-to-one that the Fed will reduce the Fed Funds rates by a further 25bps at its next FOMC meeting on Dec 18th in spite of relatively solid US economic data.
Outside of the U.S., stocks generally registered gains, with the best performing index of the week being the Shanghai Composite (+1.8% WoW). Away from equities, European bond investors were mostly focused on French government bonds. In an ironic twist, French government bond yields rose briefly above those on Greek bonds mid-week as you can see in the graph below from the FT.
This is difficult to imagine because it was only a bit more than a decade ago that the Euro was in crisis, and Greece and other peripheral Eurozone countries’ bond yields were soaring due to their own fiscal mismanagement, a follow-on to the GFC. However, it is “core” France that is now facing its own crisis with the government’s ability to pass a 2025 budget at an impasse. Prime Minster Michael Barnier seems unable to get the necessary support of the far right RN party under the leadership of Marine Le Pen, raising the possibility that the government could fall. Naturally, investors in French government bonds are concerned about the direction of the deficit, the budget impasse, and general government gridlock.In other asset classes, both gold and oil prices declined last week. The US Dollar also weakened The Yen strengthened as Japanese inflation for November was stronger than anticipated, increasing the odds that the Bank of Japan might tighten its monetary policy faster than thought. The Euro and Sterling also strengthened slightly vis-à-vis the US Dollar.
If you really needed some excitement last week – or for most any week really – look no further than Bitcoin. Even in low volatility weeks, the swings in the benchmark cryptocurrency put volatility in nearly any other asset class to shame. Last week was no exception, with Bitcoin trading in a range (intraday) of $90,771 (Nov 26) to $99,656 (Nov 22) during the last seven trading sessions, pushing around prices on proxy crypto firms like Coinbase (COIN) and MicroStrategy (MSTR). I recently wrote about MicroStategy in an article you can find here.
The runup to and arrival of “Black Friday” also generated excitement, as is normal every year, and will be a pivotal point for many global retailers. It certainly seemed to me though that Black Friday sales started well the pertinent Friday arrived, so I will be curious as to how much this important retail day in isolation stimulated sales. This will be especially interesting given the fact that consumers seem to be “trading down” to less expensive products and brands, at least those that are discretionary.
MARKETS LAST WEEK
The tables below show the performance of the various indices and asset classes tracked by EMC.
MY TRADES LAST WEEK
I was mostly active as far as a hedging strategy on core long position CRWD before their earnings, which turned out to be a good idea. I also wrote a series of short-dated (Dec 6th) covered calls on several positions towards the close on Friday – including AAPL, NVDA, CRWD and BRK – to generate income.
WHAT’S AHEAD
Economic data: PMI manufacturing, services and composite data for November will be released for several countries next week, including the US. We will also get job markets data in the US, including a JOLTS report and the November employment report on Friday.
Monetary policy meetings:
ECB: Dec 12
FOMC: Dec 17/18
Bank of Japan: Dec 18/19
Bank of England: Dec 19
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