By Aoifinn Devitt, CFP® – Chief Global Market Strategist
As the Midwest shivers through its first real cold spell of 2024 we see the realization that a another thing has gone the way of the landline phone and the Blackberry device – the snow day. That low rumbling sound that rises across Lake Michigan is the sound of Chicago-area parents grumbling as they grapple with eLearning and the COVID-era trauma that it may provoke. Staying in the frigid Midwest, we read of Teslas with dead batteries that could not charge in the extreme cold, while office buildings struggled with frozen plumbing. Bah Humbug indeed.
Over the holiday weekend, the Iowa Republican caucus and a landslide victory by Donald Trump kicked election fever into a new gear. By upending some forecasts of the relative strengths of people in a narrowing Republican field, this decisive victory may create a new election narrative. If it persists, it heralds disruption on the horizon.
On the topic of disruptors, in stock markets last week’s launch of Bitcoin ETFs were a barometer for risk appetite as the year started – and the appetite was clearly quite healthy. Between $1.4 – 2 bn flowed in to Bitcoin ETFs in the first few days of trading, but this was matched by outflows from other similar digital asset vehicles – so perhaps the headline flows were not as advertised. Bitcoin itself actually fell by over 5% over the last five days, suggesting that the ETF issuance was largely priced in before it occurred.
After last week’s exuberance, markets started the shortened holiday week a little frosty too – shedding a little of last week’s gains after indications that the Fed might not be as quick as estimated to lower rates. As the chart below shows, last week, growth stocks surged, which defied the recently slightly higher inflation numbers.
Stress on the geopolitical front continued over the weekend with the Houthi rebels defiantly continuing their attacks on cargo ships in the Red Sea even after US and UK strikes. The potential for supply chain disruption was confirmed by an announcement by Shell that it was suspending Red Sea shipments, following BP’s temporary pause last month. Oil responded to the uncertain climate by climbing to $80 a barrel, before falling back into the 70s.
There may not be snow days, but in much of the country investors will have spent the last few days indoors – even house bound. If that has driven them stir crazy and the urge to look elsewhere has been sparked – moving home might again have come on to the agenda. Mortgage rates, having peaked at near 8% in the fall have now nudged below 7% to 6.66% (Freddie Mac). With estimates of three or more rate cuts in 2024 this is likely to go lower in time, and this may stir life into the housing market.
As we wait for the thaw, there is a lot to process in the weeks ahead.
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