Market Commentary — January 17, 2023
The stock market is off to a good start to the year, as stocks recorded their second consecutive week of gains on inflation data and corporate earnings season.
Nasdaq and growth-oriented sectors outperformed, helped by rebounds in some mega-cap technology-related names, including Amazon.com, Tesla, and Microsoft.
Financials JPMorgan Chase, Wells Fargo, and Bank of America all beat consensus earnings expectations but delivered cautious guidance.
Investors were awaiting CPI data which came in at 6.5%, its lowest level since October 2021, and less food and energy Core Inflation fell to 5.7%. Treasury yields trended lower on the news, with the 10-year dropping to the 3.4% level. Given that many inflation indicators like housing lag, we could be nearing the end of the Fed’s tightening cycle. The next increase could be only 25 bps.
In ETF land, Grayscale slams the barring of a spot bitcoin ETF as “unreasonable” as rumored suitors like Valkyrie and Osprey are in the wings. Samsung Asset Management launched a Bitcoin Futures ETF in Hong Kong and is also weighing a spot Bitcoin ETF filing.
Mutual Fund to ETF conversions, swapping mutual funds into exchange-traded funds remains a big trend, with nearly 40 mutual funds having been reborn as ETFs since the first switch in March 2021, according to ETF.com. data. But an ETF wrapper is no guarantee of success. As Bloomberg’s Eric Balchunas aptly puts it, “you can change the bowl, but the dog still has to want the food in the bowl.”
Two of the top ETF launches of 2022 were actively managed mutual funds now in ETF format: Dimensional U.S. Small Cap Value ETF (ticker: DFSV), with $1 billion in assets, and the $1.2 billion Capital Group Growth ETF (CGGR), both of which launched in February.
Finally, something I am super excited to announce that I am a part of, Women in ETFs is launching a Southern California Chapter. We are in the early planning stages, but if you are interested in joining or volunteering, please reach out for more information or sign up here.
Have a great week everyone and hope you had a wonderful Martin Luther King Jr. holiday. Here is one of my favorite MLK quotes that markets seem to be taking to heart these days – “Faith is taking the first step even when you don’t see the whole staircase.”
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