Interest-sensitive Nasdaq lags behind
Good employment data combined with lower wage growth on Friday, 6 January, has given stock markets a boost at the start of 2023. European stock markets have risen more than US indices. From current levels, Nasdaq offers the most potential, given a lower return requirement from investors.
The S&P500 index fell by 1.2 per cent on Thursday, January 5, but
rebounded by 2.3 per cent on Friday, January 6. US bond yields fell by 16-20
basis points on the 10-year, and 2-year yields, respectively, after the growth
rate for wages turned out to be lower than expected (4.6% annual rate against
an expected increase of 5.0%). In December 2022, 223.000 additional jobs were
created in the United States (predominately in the private sector), versus an expected
increase of 200.000 new jobs.
Most of the investor market (73%) now believes that the Fed will only
raise policy rates by 25 basis points in their following rate announcement on February
1st, 2023. More encouragingly, the US bond market started strong in
January 2023, with as many issues in the first week of 2023 as in the last five
weeks of 2022. Increased appetite for bonds among investors can be seen in the
US high-yield
corporate bond ETF: HYG ETF, which has recovered from around 71 on 13 October to 75.85 at the time
of writing. Following this rebound, the HYG ETF has hit the MA200.
US HYG ETF in a daily one-year-chart (In USD)
Interestingly, European stock indices such as the CAC, DAX and OMX have outperformed in January 2023 compared to US stock indices. This comparison includes the Nasdaq, where past high earnings multiples followed by a significant decline in 2022 illustrate this index's degree of interest rate sensitivity. One possible explanation is that the inflation rate in Europe is currently higher than in the US, despite lower economic growth.
Significant stock indices performance 1-9 January 2003, in one month and one year
For those who see the current trend towards lower inflation expectations
and, thus, interest rates as lasting, Nasdaq could be an instrument for
exposure. This is because Nasdaq has had a lousy performance over the past year.
Given lower investor return expectations, Nasdaq could rise more than European
and other US indices, such as the Dow Jones and S&P500.
Nasdaq Index, a daily one-year chart (In USD)
Bull & Bear-Certificates
Technically, the Nasdaq looks to have found a bottom formation from 10 750 to 10 950.
Nasdaq index, a weekly five-year chart (In USD)
The full name for abbreviations used in the previous text:
EMA 9: 9-day exponential moving average Fibonacci: There are several Fibonacci lines used in technical analysis. Fibonacci numbers are a sequence of numbers in which each successive number is the sum of the two previous numbers. MA20: 20-day moving average
MA50: 50-day moving average
MA100: 100-day moving average
MA200: 200-day moving average
MACD: Moving average convergence divergence
Risks
This information is neither an investment advice nor an investment or investment strategy recommendation, but advertisement. The complete information on the trading products (securities) mentioned herein, in particular the structure and risks associated with an investment, are described in the base prospectus, together with any supplements, as well as the final terms. The base prospectus and final terms constitute the solely binding sales documents for the securities and are available under the product links. It is recommended that potential investors read these documents before making any investment decision. The documents and the key information document are published on the website of the issuer, Vontobel Financial Products GmbH, Bockenheimer Landstrasse 24, 60323 Frankfurt am Main, Germany, on prospectus.vontobel.com and are available from the issuer free of charge. The approval of the prospectus should not be understood as an endorsement of the securities. The securities are products that are not simple and may be difficult to understand. This information includes or relates to figures of past performance. Past performance is not a reliable indicator of future results.