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The S&P closed up for a fourth consecutive session yesterday. Albeit the advance was actually a tad small than the previous day, internals were substantially better, with twice as many advancing stocks than declining stocks, eleven out of eleven sectors up on the day and 38 stocks hitting a new 52-week high versus only two a new low. The distribution of those 38 stocks at new 1-year highs is also interesting, as the leading sectors are NOT classified as defensive:
Whilst Trump’s virtual speech in Davos had seemingly little impact on financial markets, however remarks launched towards the end of the session had, as Trump reiterated that “energy prices and interest rates must come down”.
As a foreseeable result, the curve steepened via lower yields at the short-end and stable to high yields at the long end. Here’s the 10y-2y yield sprea:
Inflation expectations, via Breakevens, increased sharply at the long end (10y):
The other directly affected asset was of course the price of oil, which dropped about one and a half percent on the day, extending its correction to about 50% of the previous upmove:
Asian markets are on the friendly side this morning, lead by the Chinese complex (Mainland & China), as President Trump sayd he'd prefer not to impose tariffs on China, but considers them a powerful tool.
Last but definitely, definitely not least, the Bank of Japan decided to double their key policy rate from 0.25% to 0.50%. It may not seem a lot, but with the 2-year JGB now at 0.70, which again does not seem like a lot but is the highest it has been since the GFC (see below), impact could start being noticeable on different fronts:
Let’s explore this in the next issue of The Quotedian, out next Monday.
Have a great day and an even greater weekend!
André
Yesterday, the Oscar nominees for the 2025 ceremony were announced. The two movies with most nominations were Emilia Pérez and Wicked, both musicals. Both movies are nominated for ‘Best Movie’, making the chances for a musical movie to win the Oscar very elevated.
The chart below shows previous years where a musical movie won the Oscar and the performance of the S&P 500 (or proxy) in that year:
Source: Wilson & Me
Not bad an outcome.