Weekly Commentary: 15 Jan 2024 – 21 Jan 2024
Major US equity benchmarks were positive over the last week. Inflation gained slightly in December as CPI increased by 3.4%, however, this figure is well down from 6.5% at the end of 2022. Inflation-adjusted wages also rose 0.8% last year, a better gain than the year before the pandemic began. Officials are unlikely to raise interest rates when they meet later this month
Meanwhile, in China, the PBOC has decided to hold its rate on its one-year policy loans at 2.5%, with expectations high for rate cuts given the weak state of the economy and the deflationary environment. Japan’s 2-year government bond yield has declined below zero for the first time since July as its yield fell 0.5 basis points to minus 0.005%, and expectations are that it is unlikely to tweak its monetary policy and a downward trend in global yields has also eased pressure on the BOJ to tweak its monetary policies.
Stock returns were positive over the week as observed across the following 3 indices, with the Dow Jones Industrial Average (+0.35%), S&P 500 Index (+1.87%), and NASDAQ Composite Index (+3.09%). Other notable key market indices that generated negative returns consist of the Straits Time Index (+0.23%) & MSCI World (+1.56%). All S&P 500 sectors registered mixed returns last week with notable sectors – Information Technology(+4.87%), Consumer Discretionary (+1.53%), and Communication Services (+3.59%)falling more than the rest of the sector.
The yield-curve remains inverted as the 10Y-2Y US Treasury spread tightened for the week at -0.21%. driven by U.S 2-year and 10-year Treasury yields falling 24 bps to 4.14% and falling 11 bps to 3.94% respectively. Market sentiment also became more risk-on as the U.S. High Yield (HY) – Investment Grade (IG) credit spread tightened 9 bps to 2.41% while the CBOE Volatility Index (VIX) fell 65 bps to 12.70%.
This coming week, Republican party members will choose their candidate for the 2024 presidential election. China will also release its 4th quarter GDP figure and the UK will also release its CPI and PPI on Wednesday.
The global REITs market’s return were mostly in the mixed across the numerous benchmarks. Hang Seng REIT Index (1.49%) and FTSE EPRA Nareit France Index (-1.01%) are the notable REITs that generated negative returns over the past week. Closer to home, the iEdge S-REIT Index (-0.10%) and most of its subsectors generated negative weekly returns with Hotel and Resorts REITs (-1.77%) and Real Estate Operating Companies REITs (-1.79%), the notable sector that underperformed 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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