OANDA – Tech gets crushed again, Fed ready to hike in March, PPI cools, Earnings on deck, Oil dips, Gold off highs
Q4 2021 hedge fund letters, conferences and more
Odey’s Special Situations Fund Strives For Noncorrelated Returns
Odey’s Special Situations Fund was up 1.6% for December, bringing its full-year return for 2021 to 24.4%. The fund has enjoyed a compound annual growth rate of 35% since its inception in October 2019. Q4 2021 hedge fund letters, conferences and more The Special Situation Fund’s benchmark, the MSCI World USD Index, returned 4.3% for Read More
Tech Stocks Get Crushed
Big Tech stocks are selling off so dramatically as a product of, ‘yes US rates are likely to go up further this year,’ but also as investors rotate into value and cyclical trades. A recent chorus of Fed speakers that have said they are open to raising interest rates in March, which means the possibility of 4 rate hikes this year is growing. Wall Street is trying to get a sense of how much growth is going to slow and the banks will start providing some insight on Friday.
Harker’s stance on inflation is that it is very high and very bad. Fed’s Brainard testified before the Senate and said the Fed is very focused on policy moves to quell inflation. With four FOMC voters now expecting to hike in March, financial markets can’t rule out it is possible that they could deliver five rate hikes this year.
Earnings On Deck
Earnings season starts with the big banks and Wall Street expects some strong results. Investment banking should have strong M&A activity and everyone knows how well the IPO/SPAC markets performed. Loan activity is expected to moderate for JPMorgan, while edging higher for Bank of America and Citigroup.
Overall optimism is strong for corporate America to navigate through the omicron wave and remain upbeat about the second half of the year.
Price increases that suppliers charge customers moderated in December. The December producer price index rose 0.2% in December lower than the 0.4% estimate and a decline of the 0.8% increase seen in November. With China’s prices that suppliers charge also coming down, that could support the further cooling of pricing pressures in the US in the coming months.
Crude prices edged lower as political pressure grew for the White House to lobby OPEC+ to make sure the group as a whole can hit their quotas as a few members have struggled. The short-term outlook still has many risks, but optimism is high that will be short-lived. Delta CEO Ed Bastian expects omicron to delay the rebound in travel demand by 60 days. The oil market will remain very tight this year and most likely over the next few years as most energy companies are not investing in massive new drilling projects.
WTI crude may pullback here only on speculation that President Biden is losing public favor and needs to do something to keep Americans happy. Biden seems like he is nowhere near getting Build Back Better done with Senator Manchin and Senator Sinema said she will not support changing the filibuster. Biden may resort to another SPR release and while that won’t solve any problems, it could send WTI crude down to the $80 level.
Gold prices are stuck in a range, edging lower on the day after risky assets took a big hit following a slight cooling with producer inflation. Gold is still comfortably above the $1800 level and could see a strong test tomorrow if earnings season, retail sales, and consumer sentiment paint an upbeat picture about the economy. Gold’s best environment in the short-term might be if risk appetite remains strong, but risks to the outlook continue to grow.
Article By Edward Moya, OANDA