Weekly Commentary

November 22, 2024

Following last week's lackluster performance, markets have resumed their bullish trend following the election result, with most risk-on assets reaching highs once again, including the S&P 500, which is trading just below the 6000 mark.? Nvidia, which reported its quarterly earnings on Wednesday, showed that the AI craze is still alive and well, while the Russell 2000 continued to outperform this week.? Earlier in the week, markets were focused on the US government's allowance of Ukrainian usage of missiles into Russian territory, fearing an escalation of the conflict.? While Putin has threatened to punish those involved, it does appear that an escalation is not imminent, and markets have since returned to their bullish trend.? However, gold has also rebounded, signaling that there are some lingering geopolitical risks.? We would therefore be cognizant of this and would also tactically add to equity positions if there were a pullback due to geopolitical concerns. Another asset that rallied was the US dollar, hitting month-long highs against other G10 currencies, as the stronger US economy is more likely to warrant a "higher for longer" interest rate scenario vis-a-vis Europe.??

Speaking about rates, the 10-year yield has hovered around the 4.40% level for the better part of the week, as traders have not pushed in either direction, probably due to the lack of economic data and the shortened Thanksgiving week upon us.??

Another major news item was the DOJ's pursuit of Google, in the waning days of the Biden administration no less.? While geopolitical risk has traditionally been relegated to overseas, there is a growing amount of it emanating from Washington, which will likely lead to volatility spikes, especially in certain sectors, including tech, pharma, consumer staples (due to immigration), among others.? We think that these volatility spikes offer trading opportunities for the upcoming year, and for those willing to ride out the volatility, there are longer-term investment opportunities as well in these sectors.??