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Weekly Brief Sheet - 21/11/22

Provides a market roundup, a selection of useful data points we use for our investment analysis, and some interesting articles/charts we have noticed recently.

Most of the major indexes gave back a portion of the previous week’s strong gains and closed modestly lower. Growth stocks lagged value-oriented shares, which were supported by gains in the consumer staples sector. The energy sector underperformed, however, as European oil and natural gas inventories reached near-peak levels. Dispelled reports of a Russian missile strike on Polish territory sparked a brief sell-off on Tuesday, but trading volumes remained muted for much of the week.

US markets will be closed on Thursday, November 24, in observance of the Thanksgiving holiday.

Investors kept a close eye on earnings reports from some prominent retailers and what they indicated about a potential economic slowdown. Target shares fell sharply after the company reported flagging discretionary spending in recent weeks, but better-than-expected results from Wal-Mart, Ross Stores, Foot Locker, and some other retailers offered a more positive picture. On Wednesday, the Commerce Department reported that retail sales excluding the volatile auto segment rose 1.3% in October, well above consensus expectations and the biggest gain since May.

The week also brought another round of prominent layoff announcements, particularly from, which announced roughly 10,000 job cuts. Jobless claims over the previous week remained contained, however, with 222,000 workers filing for unemployment benefits—claims have remained within a tight range of 214,000 to 226,000 since late September.

Down under the ASX finished marginally down last week. Investors in Australia are looking to the latest political moves as the frosty relationship with China seems to be thawing. Iron ore responded in kind almost a percent up for the week. Meanwhile, the Australian dollar was slightly weaker as hawkish Federal Reserve commentary gave its US counterpart a brief lift.

The U.S. Treasury yield curve inverted further during the week, driving the inversion in the two-year/10-year curve segment—historically, a typical but not conclusive indicator of a coming recession—to its deepest level in over 40 years. Short-term U.S. Treasuries repriced to higher yields, particularly after Federal Reserve Bank of St. Louis President James Bullard said that the Fed’s terminal policy rate should reach a minimum level of 5% and may need to go as high as 7% to achieve the central bank’s inflation objectives.

With indicators like the 2y-10y flashing, large companies now swinging from hiring freezes to layoffs, producer sentiment falling and discretionary spending feeling more head in the sand than rational, we remain concerned on the outlook for the next twelve months.


Topical Charts:

FED Balance Sheet


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