Asian Equity Strength
All major Wall Street indices were higher in afternoon trading, with the S&P 500 up 1%, the Dow gaining over 350 points, and the Nasdaq adding 1.5%.
Sentiment improved after the Federal Reserve left the fund rates unchanged, with a less hawkish tone than anticipated.
Currently, markets indicate a greater probability of the first rate cut occurring in November, instead of September.
In corporate news, Qualcomm surged by 8% after forecasting quarterly sales and adjusted profit above expectations, and Carvana soared by 33% as it anticipated a surprise rise in current-quarter retail sales and core profit.
MGM Resorts International added 2.8% on the back of upbeat results, while DoorDash sank 10% on a dismal outlook, and Etsy plunged 15% after sales and profit also fell short of expectations.
After the Fed shot down concerns of stagflation or any prospects of rate hikes, the December Fed Funds futures posted an outside day (a technical reversal signal), and so did the dollar.
What does that portend?
Rates lower, which is good for stocks.
Dollar lower, which should continue to fuel commodity prices.
Let's take a look at what might be the best place for investment returns in 2024.
Asian stocks. We already know Japanese stocks have been on a tear (Gryning members were pointed towards Japan in our February outlook, excerpt below) - up as much as 24% this year (at the March highs). Here's the Hang Seng Index (Hong Kong). It was up 2.5% overnight and has just broken out of this down trend that started in Q1 of 2021.
And there's a similar chart in Chinese stocks …
Stocks were in decline to start the year in China, on weak growth prospects for 2024.
The Chinese government responded on January 22 with promises to prop up the stock market - that was the bottom in FXI and the Hang Seng.
The Chinese central bank cut the reserve requirement ratio by 50 basis points on February 5th, to stimulate the economy. It was the biggest cut in two years, and it put the bottom in the Shanghai Composite (the broad Chinese stock market).
On March 4th the Chinese government said they would target "around 5%" growth this year, at the annual National People's Congress legislative session - implying more aggressive fiscal and monetary policy fuel.
With the bottom of U.S. stocks in April (on the de-escalation of Iran/Israel, reduced global risk), Asian stocks have had the relative strength.
February 2024 | Multi-Asset Outlook (excerpts)
