Weekly market summary – w/e 5th May

US stocks bounced back strongly on Friday to recover the majority of the decline earlier in the week. The week started on a down note with bank concerns continuing to weigh. US regulators had stepped in on Monday to seize First Republic Bank, later announcing that JP Morgan Chase had taken over the failed bank.

On Wednesday, the Federal Reserve announced a further 0.25% rate hike in line with market expectations. A possible pause in the tightening cycle was also signalled by the removal from the central bank’s statement, of the phrase “additional policy firming may be appropriate” – this had previously been included. However…

Full report
https://realmim.com/fed-and-ecb-raise-rates-by-a-quarter-percent-boe-expected-to-do-the-same-on-thursday/

Disclaimer: ‘Where the business has expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice. The information contained within this communication is believed to be reliable but Realm Investment Management Limited does not warrant its completeness or accuracy.

This communication is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell investments.’

Stock-markets were mixed last week. The US was lower, Europe higher. Asia markets were generally lower with Japan bucking the trend.

In the US, each week seems to bring fresh news regarding the economy and inflation to change investors’ minds. Latest consensus is that the economy is proving surprisingly resilient and therefore the Fed will have to keep interest rates higher for longer. At least that’s the way economists surveyed recently by the Wall Street Journal are seeing it and recent comments from Fed policy makers appear to concur.

Full report
https://realmim.com/us-economy-proving-resilient-and-higher-for-longer-may-be-back-on-the-table/

Disclaimer: ‘Where the business has expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice. The information contained within this communication is believed to be reliable but Realm Investment Management Limited does not warrant its completeness or accuracy.

This communication is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell investments.’

Latest inflation and unemployment data both indicate the US economy is slowing but maybe not enough for the Fed to delay another 0.25% rate hike in May. CPI data released on Tuesday showed that core prices increased but US inflation actually slowed more than expected in March and PPI data showed that US Producer Prices fell 0.5% mom in March, the most in nearly three Years.

Full report
https://realmim.com/us-economy-is-slowing-but-maybe-not-enough-to-avoid-a-further-rate-hike-in-may/

Disclaimer: ‘Where the business has expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice. The information contained within this communication is believed to be reliable but Realm Investment Management Limited does not warrant its completeness or accuracy.

This communication is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell investments.’

The big surprise at the start of this week was the leap in oil prices after OPEC+ announced a cut in oil production. At one point today oil was up more than 8% from Friday. There was a similar gain over the previous week and not surprisingly the best performing sector last week was Energy. James Bullard, President of Fed Bank of St. Louis said that an increase in the price of oil might make the job of lowering inflation more challenging. Clearly the odds of another Fed rate hike at the next meeting just increased.

Full report
https://realmim.com/opec-shock-announcement-to-kick-off-the-week/

Disclaimer: ‘Where the business has expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice. The information contained within this communication is believed to be reliable but Realm Investment Management Limited does not warrant its completeness or accuracy.

This communication is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell investments.’

Equities managed to finish generally higher for the week although it was a volatile period with more banking trauma and investors weighing central banks’ response and inflation concerns.

Full report
https://realmim.com/stock-markets-finished-higher-last-week-despite-rate-hikes/

Disclaimer: ‘Where the business has expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice. The information contained within this communication is believed to be reliable but Realm Investment Management Limited does not warrant its completeness or accuracy.

This communication is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell investments.’

Bank sector woes continued last week increasing concerns about the stability of the US economy. Many investors now think the Fed may be forced to pause its current cycle of rate increases in response. We’ll find out on Wednesday.

Following the collapse of Silicon Valley Bank in the US, which prompted a sell-off in risk-assets, stocks rebounded after US CPI data on Tuesday showed the annual inflation Rate fell to 6% in February. This provided some relief although core inflation was reported higher than forecasted.

News came on Wednesday that Credit Suisse was also having problems and yesterday (Sunday) UBS was persuaded by regulators to buy its rival in an emergency deal with the hope that confidence could be restored. Today (Monday) markets are a bit calmer – equities are holding steady, the US 10-yr Treasury Yield is slightly higher and the Dollar down a little.

Full report
https://realmim.com/markets-calmer-today-after-bank-sector-turmoil/

Disclaimer: ‘Where the business has expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice. The information contained within this communication is believed to be reliable but Realm Investment Management Limited does not warrant its completeness or accuracy.

This communication is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell investments.’

Stock markets have weakened after last week’s failure of Silicon Valley Bank and Fed Chairman Jerome Powell’s testimony before Congress. The US Dollar declined. The yield on the 10-year US Treasury note has fallen back from above 4% last week to 3.5% today (Monday).

On Tuesday Powell said that the task of bringing inflation back to the long-term target of 2% might have to include raising rates higher than previously anticipated and at a faster pace, adding that the process “is likely to be bumpy”.

Full report
https://realmim.com/stocks-lower-today-after-hsbc-buys-uk-arm-of-collapsed-silicon-valley-bank/

Disclaimer: ‘Where the business has expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice. The information contained within this communication is believed to be reliable but Realm Investment Management Limited does not warrant its completeness or accuracy.

This communication is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell investments.’