Cela's Weekly Insights - May 28, 2023
Welcome back everyone. As has been previously noted, the drama of U.S. debt ceiling negotiations tends to parallel the heart-racing tension of a sporting event - always winding down to those final, suspense-filled seconds before a game-winning shot is taken. Carrying on with that narrative, we have an update from Capitol Hill. House Speaker Kevin McCarthy has announced the successful negotiation of a preliminary debt ceiling agreement between the White House and Republican leadership.
The anticipated schedule for the process is as follows: Finalize the bill's language, confirm its terms with the White House, and initiate another discussion with the President by afternoon today. The text of the bill will then be made public, with a vote in the House slated for Wednesday.
However, Speaker McCarthy cautions that we're not quite across the finish line yet. "We still have a lot of work to do" to ensure the deal gets ratified before the impending June 5 deadline. While McCarthy remained tight-lipped about the specifics of the agreement, he did outline its overarching objectives: a historic decrease in spending, significant reforms aimed at moving individuals from poverty into employment, and a reining in of governmental overreach. Additionally, it promises no new taxes or government programs. This news "should" set a positive tone for the stock market when it opens tomorrow.
On the topic of stock market performance, the S&P 500 eked out a positive week, while the NASDAQ marked its 5th consecutive week of gains (see performance chart below), elevating its year-to-date performance to a commendable 27%. Interestingly, despite the struggles of the S&P 500, our beloved tech giants remain unfazed and continue to push forward. This resilience has led some to suggest that these tech behemoths could be the ones propping up the S&P 500.
Data from market breadth charts seems to reinforce this hypothesis. Currently, only 44% of companies are above their 200-day moving average in the S&P 500, a figure that shrinks further to 35% for the 50-day average. An unusual discrepancy is also observable between the index price and the percentage of companies bearing the load. Let's keep a close eye on this as we move forward.
S&P 500 | 200 Day Moving Average vs. Index Price
S&P 500 | 50 Day Moving Average vs. Index Price
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Shifting our gaze to Europe - particularly Germany, where I currently reside — it's important to keep our global perspective in balance. Recent data indicates that Germany has slipped into a technical recession, marked by two consecutive quarters of negative GDP growth. However, this downturn had been anticipated by the market, especially in light of the ongoing Ukrainian crisis that has led to a sharp increase in energy prices, particularly gas - a resource on which Germany is heavily reliant.
Remember, the stock market is a forward-looking entity, always pricing in future possibilities based on present events. This concept is key in understanding market movements and responding strategically. As we proceed, let's keep this in mind.
Last Week's Market Performance: A Global Overview
Last Week's Survey Results | Calender Week 21/2023
In case you didn't catch it, our poll last week painted a picture of considerable optimism towards the S&P 500. A substantial segment of our followers on LinkedIn and Instagram expressed bullish sentiments, with 65% of LinkedIn and 73% of Instagram respondents forecasting a robust performance from the index. As pointed out earlier, the S&P 500 managed to squeeze out a positive performance, even if only by a thread. Nonetheless, any positive movement should be celebrated in these uncertain times. As we move forward, we're eager to observe how the index and broader market react to the promising developments surrounding the debt ceiling negotiation.
That's all for today folks. If you've made it this far, thanks for tuning in ??.
Cheerio!