Market Commentary — November 21, 2022
Stocks gave up some ground this week after last week’s inflation-data-infused rally. Growth stocks lagged value shares. Energy shares sold off on peak inventory levels for oil and gas in Europe.
On Wednesday, the Commerce Department reported retail sales ex-autos segment rose 1.3% in October, well above consensus expectations and the biggest gain since May. But retail earnings were a mixed bag. Target missed, but Wal-Mart, Ross, and Foot Locker saw better results.
Despite prominent lay-off announcements from big tech companies, unemployment claims remain in a very tight range. Meanwhile, industrial production fell unexpectedly in October, weighed down by weakness in the energy and materials sectors, to its lowest level since May 2020.
Fed comments suggesting the Fed has “a ways to go” before ending rate hikes, sent shares down even amid a flat producer price index (PPI) print. Markets are still pricing in a 50 bps rate increase for December.
One of my favorite market pundit quotes of the week – “The Fed can’t print people or oil.” Basically, interest rates can only do so much to curb inflation.
The U.S. Treasury yield curve inverted further during the week, driving the inversion in the 2-year/10-year curve to its deepest level in more than 40 years. Historically, a sustained yield curve inversion like this has been a very reliable indicator of a recession. Here’s a great article from Morningstar on the topic.
In ETF land, the FTX crypto contagion continues to wreak havoc, with some big Wall Street firms holding the Bitcoin bag. Goldman Sachs was the largest holder of ProShares Bitcoin Strategy ETF (BITO).
The crypto fallout has also sent the $11.4 billion Grayscale Bitcoin Trust (GBTC) plunging 74%, outpacing Bitcoin’s 64% slide, an unprecedented 42% discount to the value of bitcoin it holds. And Valkyrie Investments, best known for its Bitcoin futures ETF, has been forced to let go of 30% of its 23-person workforce in recent weeks.
While nobody knows the true extent of the FTX fallout, it may ultimately favor blockchain ETFs like the Amplify Transformational Data Sharing ETF (BLOK) which give investors exposure to the price movements of crypto without worrying about investing directly in Bitcoin.
This week is a shortened Thanksgiving session week. Besides family gatherings, football, turkey, and online shopping, Thanksgiving also kicks off several seasonal market factors to consider: 1) the Post-Thanksgiving rally, 2) the Santa Claus rally, and 3) the January effect.
Happy Thanksgiving everyone! May a thankful heart open your eyes to the multitude of blessings that surround you!
CEO and Co-Founder