Category: Market Watch

Written by Sid Mohapatra We continue to witness a grappling battle between risk-free rates and risk assets wherein interest rates dictate the pace, change, and direction of risk assets. Market participants are wary of the uneasy financial reality of higher rates causing meltdowns in equities with the most prominent example being the tumultuous drop in December 2018 fueled by the prospects of tightening interest rates by Fed Chairman Jerome Powell in 2019. Most trend-following algorithms continue to recycle risk and exposure from tech stocks to recovery-themed stocks as evidenced by the Dow relative performance to the tech-studded NASDAQ throughout the week.   In any event, after sharp and steady gains over the past year, the stock market’s mood may feel like it is changed in recent days with the conversation shifting from reopening and stimulus to inflation and interest rate risks. TSX closed at 18,381 posting an impressive 1.8% and … Continue reading MarketWatch

Written by: Sid Mohapatra The saga of higher rates pushing risk assets continues to be a theme that will play out across 2021 and beyond. Last week we saw heightened bond volatility as tracked by the MOVE index, which was on the highest level since April of last year. This unprecedented spike in yields spilled across other asset classes as prospects of an economic recovery and pick-up in inflation expectations. From a technical perspective, we will continue to sell coupon and bill supply from the treasury as well as pressure on treasuries from mortgage sellers to push yields higher. Finally, comments from Fed Chair Jerome Powell that higher yields are a statement of confidence did no good to investor appetite. As a broad speculative takeaway, we might observe that good economic news is bad news for the stock market as we come to an end of a multi-year expansionary cycle … Continue reading MarketWatch

Written by Sid Mohapatra  Domestic risk markets post their best weekly gain since April last year leading the TSX to close at record high levels. We continue to observe the effects of the vaccine rollout and improved expectations on President Biden’s fiscal stimulus package as drivers of this rally. On the commodities front, WTI had a phenomenal week and reaching a 52 week high, clocking in an almost 10% gain for the week, which in turn supported Canadian equities. Despite such positive movements, we did see a significant job loss in the January job report in Canada with the economy shedding 213,000 jobs thereby putting the unemployment rate at 9.4%, the highest since August. Having said that we continue to maintain the recovery of jobs in labour markets through the course of the year. This will be the result of a decrease in new COVID 19 cases and a gradual … Continue reading MarketWatch

Written by Sid Mohapatra  Although we cover and provide a broad summary of financial markets, I would be remiss if I don’t shed some light on the $GME saga. I do believe it has been covered extensively in other media platforms but this ticker captured the imagination of the entire world and definitely exposed fragilities of market makers and brokers when targeted with weaponized gamma and belligerently manufactured short squeezes. From the sidelines, it’s the perfect set-up of a David vs Goliath tale but I fear this can mimic Bridgewater’s risk-parity trade that went awry in March 2020 during the corona crisis last year with historic correlations breaking down and driving volatility across asset classes.  North American equities finished the week with their largest weekly loss in the last quarter as remarkable levels of market uncertainties persisted highlighting as well as raising concerns of frothy levels of speculation and risk-taking … Continue reading MarketWatch

Written by: Sid Mohapatra    Markets continue to experience dissonance between positive news and near-term challenges thereby leading markets to finish off record highs. There continues to be much focus on the significant $1.9 trillion stimulus program put forth by Joe Biden’s administration, adverse news on the virus front and the pace of vaccine rollout. Also, we have more than a fifth of the companies in the S&P 500 reporting in the next couple of weeks. The key emerging drivers for risk markets continue to be the trifecta of the pace of the vaccine rollout, stimulus-dependent consumption and the economy rebounding throughout the year.   Despite the Bank of Canada projecting the Canadian economy slowing in the first quarter and holding rates unchanged, we experienced strong retail sales in Canada, gaining 1.30%. We continue to witness extremely accommodative monetary support from central banks with low rates being the norm across … Continue reading MarketWatch

Written by: Sid Mohapatra  North American equities saw some imminent weakness closing in the red between 60 and 140 bps. This pullback comes after record highs the week prior and also amidst the uncertainty around the new earnings season kicking off. US President-elect Joe Biden gave the green light to a significant dose of more fiscal stimulus with the quantum of support close to $1.9trillion to fight the adverse economic effects caused by the coronavirus. The pandemic continues to dominate the investor news cycle as the pace of distribution continues to underwhelm expectations and there are more strains of the virus being detected leading to the prognosis of further needs to support businesses and facilitate lockdowns. Markets continue to price additional fiscal stimulus to support job creation and provide support in point of economic weakness. This continues to provide a tailwind to stocks and support risk markets. Although stocks have … Continue reading MarketWatch

Written by: Sid Mohapatra Risk markets in Canada remain mixed this week. We witnessed relative strength in the energy space, but the markets were weighed down by the underlying weakness in consumer and healthcare stocks. US markets continue to deal with uncertainty over incremental stimulus measures as well as the slowdown in the economic rebound, which are reflecting in the slower pace of job creation. BOC left their rate decision unchanged and a relatively neutral outlook highlighting both upsides as well as downside risks to the Canadian economy. Although economic growth has lost some steam, the prospects of a strong rebound in economic activity are promising over the next year.   Canadian authorities have provided colour on rolling out the vaccine given that Pfizer has been approved. This is a catalyst to accelerate economic growth and lay the foundation of a robust model for recapturing lost spending over the last … Continue reading Market Watch

Written by Sid Mohapatra  We continue to witness an extension of the already extended rally of risk markets into the first week of December. Canadian job numbers cooled off slightly this month but we have seen steady gains in the previous months despite a sharp increase in COVID-19 cases. The Canadian economy created 62,000 jobs with the unemployment rate edging lower to 8.5%.   Non-Farm Payrolls in the US were muted for the month of November, which stirred expectations of additional fiscal stimulus under Joe Biden’s presidency. These fiscal support measures have propped up equities to record highs. In other asset classes, Oil remains steady with OPEC delaying production increases leading WTI Brent closing at a nine-month high.   The future path of risk markets remains dependent on the trifecta of vaccine progress, reopening of the economy and potential economic support from the fiscal side. Having said that, the TSX … Continue reading DeGroote MarketWatch

Written by: Sid Mohapatra This week continues the theme of the markets toggling between positive vaccine-related news with increasing COVID infection rates and daily new highs in outbreak numbers. At the moment, it seems the stock market is fairly optimistic with the prospects of a swift recovery in economic activity, consumption, and productivity. This is evidenced by the Dow Jones skyrocketing 12% this month while crossing the significant 30,000 mark. The rise to 30,000 for the Dow Jones Industrial Average has come from depths of the pandemic lows and is fueled by encouraging virus containment tools via vaccines. There continues to remain significant uncertainty and challenges amid rising cases and renewed shutdowns across North America, however, this healthy risk appetite is pricing in a Post-COVID rebound in 2021 and beyond. Other indexes have also been gaining steadily with the S&P 500 as well as the Russell 2000 posted highs this … Continue reading DeGroote MarketWatch

Written By: Sid Mohapatra It was a lacklustre week on Wall Street as investors continue to worry that surging coronavirus cases and further lockdown restrictions to mitigate outbreaks will cause a slowdown in the economic recovery. Further, there continues to be heightened uncertainty with regards to accommodative monetary policy measures by way of COVID-19 related stimulus packages to be withdrawn by the US Treasury as early as 31st December based on comments by Steve Mnuchin. This certainly was a catalyst to the mild risk-off tone throughout the week with the S&P 500 losing (0.80)% closing at 3,558. In stark contrast, the TSX gained 200 basis points closing at 17,017. On a broader note, we see certain trends emerging in risk markets over the last two weeks with secular rotation amongst various asset classes and sectors. This has manifested in a tug of the war between the tech pack and the … Continue reading Market Watch Week of Nov 16, 2020