Market Overview Week of December 26

Market Synopsis: Equities down, Treasury Yields up, Commodities up, Dollar down, Crypto down

Past Week Event(s):

- Pending home sales index indicates the level of housing activity in the market. As of late, the Fed’s efforts in hiking interest rates to reduce inflation have been working, but the effect on the housing market has been negative. Normally raising interest rates lowers consumer confidence and spending, so in this sense that trend makes sense. U.S. pending home sales fell 4 percent this November dragging the index to its lowest levels since April 2020.

Next Week:

- The Unemployment rate is coming up, and as always this is a very important number to understand the health of the economy. In recent months there has been stability around the 3.5% mark, so investors will see if this trend continues or if there is a change.

- New Years is coming up, and WeeklyTheta wishes everyone a happy New Years. Being an investor can be stressful, so being organized and keeping up is very important. Everyone should look into creating healthy habits in 2023, and reading WeeklyTheta on a weekly basis would be a great start. Happy New Years!

Market Snapshot:

- This was the last week of trading for the year of 2022 and the Santa Claus Rally was nowhere to be seen this year. The market was closed this monday to celebrate Christmas. There was little macro economic data this week to excite markets. Equity markets closed the week out almost unchanged. The dollar drifted lower on the week while Gold moved higher. Bitcoin moving with Equity markets also moved slightly lower on the week. As a whole this week was rather bland as all eyes are set on the new year.

U.S Equities:

Indexes(Week)

SPX 3,839.50(-0.14%), DJIA 33,147.25(-0.17%),

NASDAQ 10,466.48(-0.30%), RUT 1,761.25(0.02%)

Sectors

- Almost all sectors closed the week out in the green with the exception of materials and consumer staples. Energy on the other hand outperformed all other sectors closing the week out up 3.68%.

Individual ETF to Note

- LQD is a critical ETF to be aware of. LQD is composed of investment grade corporate bonds. There are two main types of corporate bonds, investment grade and high yield. Investment grade corporate bonds have a very high credit rating with a very low risk of default meaning they are most likely to be able to return the principal with interest. High Yield corporate bonds are the opposite in the sense they have a higher risk of default, but with the higher risk of default they pay a higher rate. LQD is focused on Investment grade corporate bonds paying a humble dividend of 3.30%. It serves as an excellent vehicle for gaining exposure to investment grade corporate bonds. For investors interested in Corporate Bonds this is a good ETF to take a look at.

Treasuries:

- Like Equities, Treasuries had a shortened week as markets were closed on Monday. Treasuries, however, surged closing the week out up on the week signficantly.

Commodities:

Oil

- Oil closed the week out practically unchanged at about $80 dollars a barrel. The next big issue for Oil markets is the re-opening of China.

Gold

- Gold was up on the week closing the year out with a 5$ dollar loss at about 1800$ an ounce.

Crypto:

BTC -16,576, -1.42% ETH - 1,197.52, -1.99%

- Bitcoin closed the week down. 2023 will be an interesting year of crypto as it struggles to recover from many massive blows it has taken this year.

Europe:

Stoxx 600- 424.89, -0.60% DAX -13,923, -0.12% FTSE 100 -7,451, -0.28%

Chart of the DAX (5-day)

- It seems likely that inflation will continue to be a major economic conflict in 2023 in Europe. The European Central Bank has a set inflation rate target at 2%, while one of the major European players, Germany, was at more than a 5x factor at 11.3% in November. The process to return back to healthy inflation rate levels will be a lengthy one for Europe and the rest of the globe alike. Although lengthy, the ECB is taking necessary measures. Since July there has been the fastest increase in monetary tightening seen before.

Asia:

XJO (Australia)-7,038, -0.97% Shanghai 180 Index-8,228, 1.14% Nikkei 225- 26,094, -0.54%

XJO 5-day Chart

- The Indian rupee has seen an overall negative 2022. Foreign investors have been quick to sell all year, and it sees its slowest growth in 2022 from the last 4 years. Heading into 2023 it will be interesting to see the growth of Asian currencies like the Yen and the Rupee considering their performance in 2022. Although past performance is not indicative of future results, investors will see if trends continue.

Sources Cited

Swaminathan, Aarthi. “U.S. Pending Home Sales Fall 4% in November to The Lowest Level Since April 2020.” MarketWatch, www.marketwatch.com/story/u-s-pending-home-sales-fall-4-in-november-to-the-lowest-level-since-april-2020-11672239997. Accessed 30 Dec. 2022.

“U.S. Pending Home Sales Sag More Than Expected in November.” CNBC, 28 Dec. 2022, www.cnbc.com/2022/12/28/us-pending-home-sales-sag-more-than-expected-in-november.html.

“Live Stock, Index, Futures, Forex and Bitcoin Charts on TradingView.” TradingView, www.tradingview.com/chart/.

Person. “High Inflation Here to Stay for Coming Months, Says German Industry.” Reuters, Thomson Reuters, 30 Dec. 2022, www.reuters.com/markets/europe/high-inflation-here-stay-coming-months-says-german-industry-2022-12-30/.