Commentary:
Equity markets posted their third consecutive week of decline in response to elevated geopolitical tensions in the Middle East and expectations on more Fed hawkishness. Growth stocks declined the most across sizes, while large value stocks held up relatively well. Semiconductors was the weakest performing industry last week, with VanEck Semiconductor ETF down -9.7% w/w. In contrast, Airlines and Healthcare Plans industries delivered strong gains. In the light of rising geopolitical tensions and sticky inflation, markets are anticipating higher volatility in equity markets, as depicted by elevated VIX index, which measures expected volatility of S&P 500 for the following thirty days.
In response to fading Fed rate cut expectations, yields continued to rise last week, with both the US and European government bond yields nearly reaching their 2023 highs. As such, developed markets fixed income currently looks extremely attractive, with 2 and 5 year US Treasuries now yielding 4.97% and 4.65%, respectively.
Week ahead has a heavy calendar, both in terms of macroeconomic and corporate results releases. The first estimate of 1Q24 US GDP growth will be reported alongside the PCE price index (Fed’s preferred inflation measure). On the earnings side, four Magnificent 7 stocks will be posting earnings, together with Boeing (BA), PepsiCo (PEP), IBM (IBM), Visa (V), and others.
