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Fed cuts interest rates, euphoria is back in - what else could go wrong?
Guillermo Malena
September 20, 2024
Weekly Market Summary - September 19th 2024
All data analysis, tables, insights and charts were generated by Avanzai’s AI agents
Summary
The Federal Reserve's recent 50 basis point rate cut, coupled with stronger-than-expected jobless claims numbers, has bolstered market sentiment, potentially setting the stage for a year-end rally in equities. Real estate and financial sectors are showing particular strength, while the technology sector's underperformance remains a key concern given its significant weight in major indices. Increased market volatility, evidenced by the VIX surge, suggests heightened uncertainty amid shifting economic indicators. In response to the rate cut, gold prices have surged to around $2,600 an ounce, reflecting increased investor interest in safe-haven assets. Concurrently, Boeing has announced employee furloughs amid an ongoing machinists' strike, and FedEx is anticipated to report strong quarterly earnings, with analysts forecasting year-over-year revenue and profit gains.
Key Market Indicators
Asset | Cumulative Weekly Performance |
|---|---|
Crude Oil (CL=F) | +4.89% |
Copper (HG=F) | +4.75% |
Russell 2000 (^RUT) | +3.22% |
NASDAQ Composite (^IXIC) | +1.87% |
Natural Gas (NG=F) | +1.87% |
Russell 1000 (^RUI) | +1.69% |
S&P 500 (^GSPC) | +1.56% |
Dow Jones Industrial Average (^DJI) | +1.53% |
Gold (GC=F) | +1.26% |
GBP/USD | +0.5241% |
EUR/USD | +0.3335% |
DXY (US Dollar Index) | -0.4609% |
The Russell 2000, representing small-cap stocks, led the gains with a remarkable 3.22% increase. This outperformance suggests that investors are showing increased confidence in smaller, potentially riskier companies, which often benefit more from economic growth midst Fed new stance cutting rates
Technology stocks also showed strength, as evidenced by the NASDAQ Composite's 1.87% gain, outpacing the broader market indices like the S&P 500 and Dow Jones Industrial Average.
It's worth noting that the CBOE Volatility Index (^VIX), decreased by 1.39% over the same period. This decline in volatility aligns with the positive performance across equity markets, indicating reduced investor anxiety and a more optimistic market outlook.
Market Insights
After the Fed's recent rate cut, historical data suggests we'll likely see some significant action in commodities over the next quarter. Gold and nickel have typically outperformed, showing the strongest returns. Meanwhile, most currencies see modest gains, but the British pound tends to lag, often dipping into negative territory. Keep in mind, past performance doesn't guarantee future results, but it's a trend worth watching.
Top Performing ETFs This Week
Banking and Infrastructure
SPDR S&P Regional Banking ETF (KRE): 5.48%
Global X U.S. Infrastructure Development ETF (PAVE): 5.11%
Energy Sector
SPDR S&P Oil & Gas Exploration & Production ETF (XOP): 4.88%
Energy Select Sector SPDR Fund (XLE): 3.94%
Value and Dividend-Focused ETFs
First Trust SMID Cap Rising Dividend Achievers ETF (SDVY): 4.37%
Avantis U.S. Small Cap Value ETF (AVUV): 4.19%
Pacer US Small Cap Cash Cows 100 ETF (CALF): 4.02%
Dimensional US Small Cap Value ETF (DFSV): 3.64%
Correlation Table
Asset Class Pair | Previous Correlation | Current Correlation | Change |
|---|---|---|---|
EUR/USD and Natural Gas | 0.48 | -0.86 | -1.34 |
DXY and Bitcoin | 0.70 | -0.57 | -1.27 |
EUR/USD and Crude Oil | -0.42 | 0.83 | 1.25 |
The correlation analysis reveals significant shifts in relationships between major asset classes. The dramatic inversion of the EUR/USD and natural gas correlation, coupled with the strengthening positive correlation between EUR/USD and crude oil, suggests a fundamental change in how currency markets are interacting with energy commodities.
That is all for this week folks! If you enjoyed please subscribe! 🤝
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