James Ooi/ uSMART Market Strategist
Over 13 years of experience in buy-side and sell-side of capital markets
Former Fund Manager of renowned asset management firm
Focus on fundamental analysis and macro-outlook for US & Singapore markets
SGX Academy trainer
This Week’s Market Outlook:
- Last week, the S&P 500 initially saw a midweek increase of 1.07%, but it ended the week with a 0.16% decline. This week marks the second consecutive week of losses.
- Last week, we witnessed a mix of economic data in the United States:
- August retail sales and initial jobless claims data performed better than expected.
- Inflation saw its largest monthly increase this year in August, with consumers facing higher prices for energy and various other items.
- The S&P 500 also closed lower on a day known as "triple witching," which involves the expiration of stock options, stock index futures, and stock index options.
- This mixed economic data has led traders to anticipate that the Federal Reserve will keep interest rates unchanged at the September 20th FOMC meeting. Market participants are now projecting the first US rate cut to occur in June 2024 (Figure 1), in contrast to the earlier expectation of a rate cut in March 2024. This shift suggests that higher interest rates may hurt valuation multiples.
Figure 1: Meeting Probabilities
Source: CME Fedwatch, 18 Sep 2023
- The most noteworthy event of the week is the Federal Reserve's FOMC meeting on Thursday.
- This week, investors should be paying close attention to the possibility of index weakness, particularly due to concerns in the semiconductor and automotive sectors. A report suggests that TSMC is apprehensive about slowing demand and has instructed vendors to delay chip equipment deliveries. Furthermore, the United Auto Workers strike against the Detroit Three automakers entered its third day on Sunday with no immediate resolution in sight.
- The strengthening dollar indicates a potential crisis in the making, as strong dollar is eroding the overseas revenues of S&P 500’s companies. On March 8th, when the US dollar index closed at 105.6, the S&P 500 was trading at 3992. Currently, the US dollar index, now at 105.22, appears poised to surpass its March high, given the impending golden cross, where the 50-day simple moving average (SMA) is crossing above the 200-day SMA (Figure 2).
Figure 2: Rising Dollar
Source: Tradingview, 18 Sept 2023
- Apple's performance could continue to weigh down the S&P 500 and Nasdaq-100. Historically, September has been a challenging month for Apple, with an average drop of 1.95% over the past 25 years. In September 2023, Apple has already fallen by 6.85%, and in the month of September 2022, we witnessed a significant drop of 12.1% (Figure 3).
Figure 3: Monthly performance of the Apple over the past 25 years.
Source: uSMART, Bloomberg, 18 Sep 2023
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