Weekly Commentary: 11 Sep 2023 – 17 Sep 2023
Returns were negative last week across the various indexes. The losses were due to stock market heavyweight Apple enduring a two-day sell off that wiped almost $200 billion from its market cap following reports that the Chinese government extends its iPhone ban to more workers as tensions with US rise. Fed Officials’ rates stance seems to be shifting towards pausing raising interest rate. Recent data shows easing inflation and a less overheated labour market, and these variables gives confidence that inflation is not going to be persistent. There seem to be underlying inflation pressure such as last Thursday’s weekly jobless claims report that came in lower than expected. It fell to 216,000, the lowest level in six months.
Canada has held their benchmark rate steady at 5% after back-to-back increases in June and July. Its economy has contracted 0.2 annualised, on a sharp slowdown in consumer spending and a fifth straight quarterly decline in housing investment. Canada’s unemployment rate seems worrying as it rose again by a half percentage point in the span of three months, and now sits at 5.5%, and job vacancies have dropped 25% from their peak last year and sit at their lowest level in more than 2 years.
Stock returns were negative over the week as observed across the following 3 indices, with the Dow Jones Industrial Average (-0.69%), S&P 500 Index (-1.26%), NASDAQ Composite Index (-1.92%). Other notable key market indices that generated negative returns consist of MSCI World (-1.32%) & Hang Seng Index (-0054%). All S&P 500 sectors registered negative returns last week with notable sectors – Information Technology (-2.34%), Industrials (-2.88%) and Materials (-2.38%) falling more than the rest of the sector. For 2022, index returns were negative for the Dow Jones Industrial Average (-8.78%), S&P 500 (-19.44%) and the NASDAQ Composite (-33.10%).
The yield-curve remains inverted as the 10Y-2Y US Treasury spread tightened to -0.69%. driven by U.S 2-year and 10-year Treasury yields rising 22 bps to 4.99% and rising 27 bps to 4.30% respectively. Market sentiment also became more risk-on as the U.S. High Yield (HY) – Investment Grade (IG) credit spread tightened 19 bps to 2.53% while the CBOE Volatility Index (VIX) has fallen 294 bps to 14.16%.
This coming week, The ECB will be making their interest rate decision. Apple will be hosting their latest product event and all eyes will be on the Iphone 15 and it was initially poised to unseat Samsung as the world’s largest handset maker.
The global REITs market’s return were mostly in the mixed across the numerous benchmarks. Thailand Property Fund & REITs Index (-0.10%), Hang Seng REIT Index (-0.60%) and FTSE EPRA Nareit UK REITs GBP (-0.56%) the notable REITs that generated negative returns over the past week. Closer to home, the iEdge S-REIT Index (-0.17%) and most of its subsectors generated mixed weekly returns with Hotel and Resort REITS (+1.91%) and Real Estate Operating Companies REITs (+0.86%), the notable sector that outperformed the rest last week. REITs generally have been affected by decreasing yield spread as interest rates surged and investors price in the possibility of reduced distributions stemming from higher financing costs. However, we do expect inflows to return to the sector given the existing attractive valuations on offer and resilience offered by the REIT asset class in light of the waning global growth outlook.
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