Let’s see how the response goes to this and if people want, I’ll make this a weekly post on Sundays
This week has been pretty interesting in the markets but one thing that stood out was, the NDX/QQQ making a new ATH or bouncing around there while the SPY/SP500 looks to break its 16 month uptrend since COVID.
Why? FED tapering news. It’s becoming more and more apparent that the FED will begin to taper buying assets this year and this impacts the SPY largely. Back in February 2021, we saw a big decoupling in stock market moves where the NDX actually fell and started a long-winded accumulation phase. It’s only this month where we have seen it break out. The SPY hasn’t had a accumulation phase yet but the tapering could bring a well-needed breather.
I’m looking at tech stocks because, with a backdrop of tapering but low interest rates till 2023, tech stocks could be the primary driver for growth. This was evident by high multiple tech stocks breaking out from their resistance levels and moving higher along the fibs.
I kept it brief for now, let me know if you want me to do this on a weekly basis @saad happy to help the community!
What i have learnt over 10 years is that a lot of the news flow changes pretty fast around interest rates, tightening, loosening. There was a lot of noise about Healthcare disruption prior to elections, then defense budgets and so on.
To me, It seems a long shot to take macro possible moves → industry → stock specific moves.
I rather focus on the companies and how they are doing vs trying to forecast. It does help to know how a given company will do in different environments and ideally have a balanced portfolio that can do well in different environments.
That said, no harm sharing this update. A similar commentary comes out from Valueline on weekdays. One of their weekly updates with the model portfolios is pretty decent as well.
I really like this - Thank you. If it’s not too much trouble please continue to provide these updates so we can benefit from them. Too much going on in the market so a snap shot of what’s impacted the market that week and what impacts that could have is useful.
Before The Bell - Stocks moved higher toward the end of the week after a tentative agreement was reached on a long-awaited infrastructure bill out of Washington. The market also appears to have started looking past the Federal Reserve’s long-term plans to pull back on its high-octane monetary policy.
Word that both sides of the aisle in Congress had settled on a roughly $1 trillion stimulus measure was a plus for stocks in the heavy equipment sector. The deal still needs to be finalized and the package was less than its proponents hoped for. Even so, another round of government spending is an added positive, coming on top of sizable cash already pumped into the economy.
Meantime, investors to an extent have come to grips with the Fed’s signals that it would begin to raise interest rates by 2023, or sooner. There are also expectations that the central bank’s heavy-duty bond-buying program will begin to diminish, possibly by early next year.
Signs of sustained inflation would accelerate Federal Reserve moves to reduce its aggressive support of business conditions. However, Fed Chair Jerome Powell this week suggested to a congressional subcommittee that much of the recent spike in inflation is being caused by dislocations caused by the pandemic. Mr. Powell’s statement pointed to substantial central bank help for a while longer.
Broadly, although the outline for the stock market now envisions the Fed as less of a source of strength within a year or two, an earnings boom can still push shares higher. Corporate profits should benefit from the above-average rate of GDP now materializing. First-quarter GDP of 6.4% looks repeatable, and may be bettered, in the three-month period now coming to an end.
Risks remain, of course, with variants of the coronavirus affecting segments of the population and not everyone vaccinated. That aside, the push toward normalization offers further promise.
