Market Commentary — December 19, 2022
Investors remain focused on inflation and interest rates this holiday season as the two highly anticipated announcements of the week: CPI and the Fed decision sent markets in opposite directions, higher early in the week and selling off by the end.
CPI (Consumer Price Index) was released on Tuesday indicating only a 0.1% increase in November and an annual rate of 7.1% inflation. This was still well above the Fed’s 2% target, however. On Wednesday, the Fed increased interest rates 50 basis points (.50 percentage points), finally backing off the 75 bps increase of the last four meetings.
But Fed Chair Powell did little to calm fears at his press conference, stressing the need for further rate hikes and highlighting the inflationary dangers of a tight labor market. Similar rate moves and commentary from European central banks on Thursday further darkened investor moods.
Treasury yields did fall on the news, especially on the short end of the yield curve, further inverting it. Interestingly, Duke Professor Campbell Harvey, the “Godfather of the Inverted Yield Curve” says he does not believe it will be correct to predict a recession this time. Here is a great graphic from James Eagle and Visual Capitalist on Visualizing (and Understanding) an Inverted Yield Curve.
In ETF news, the SEC reiterated its decision to reject Grayscale’s GBTC bitcoin trust ETF conversion proposal. Meanwhile, amid crypto turmoil, Hong Kong debuted its first crypto futures ETF. JP Morgan is converting four more of its mutual funds to ETFs, representing $2 billion in AUM. According to Bloomberg, investors are spurning mutual funds in record numbers, driving a $1.5 trillion gap in money flow from the old-school investment vehicles into more-popular ETFs.
And okay performance chasers, ETF.com just published its list of the 10 best ETFs YTD, or actually through November 23rd. And the #1 non-levered ETF strategy for 2022 was … iShares MSCI Turkey (TUR), up 79.88%. The rest of the names in the top 10 were all tied to the energy sector.
The holiday season is upon us – enjoy!
CEO and Co-Founder