ASX 200 to rise, S&P 500 hits record high for the first time in 2 years

ASX 200 futures are trading 26 points higher, up 0.35% as of 8:20 am AEDT.

S&P 500 SESSION CHART

MARKETS

• S&P 500 rallies intraday to close at all-time highs – This marks a new all-time closing high for the first time since 3 January 2022
• S&P 500 now 11% higher than when the Fed first started hiking rates in March 2022
• Time between new highs was the 5th longest period in history with the 8th worst max drawdown
• Megacap tech stocks led to the upside, notably Nvidia (+4.2%), Alphabet (+2.0%) and Meta (+1.95%)
• Bullish focus points for the week: Markets still pricing in more than 140 bps of easing this year, more QT tapering speculation, disinflation momentum, AI proliferation theme, renewed market momentum and corporate buybacks reopening in late January
• Bearish focus points for the week: March rate cut expectations down to 46% from 79% a week ago, pickup in hedging with reports of big VIX call buyers, breadth concerns, sell-the-news reactions to recent earnings and China growth drag
• TSMC's earnings strengthen confidence in semiconductor rebound (Bloomberg)
• Passive investment funds surpass active in total assets at end of 2023 (CNBC)

STOCKS

• Macy's plans to cut around 2,350 job, or 3.5% of its workforce Bloomberg)
• Amazon announces more layoffs, this time in the Buy with Prime segment (CNBC)
• CVC Capital Partners opts to finance two of its latest buyouts with loans from investment banks (Bloomberg)

EARNINGS

• 10% of S&P 500 companies have reported Q4 results
• 62% have beaten consensus EPS expectations, below the 77% five-year average
• 62% have beaten consensus revenue expectations, below the 68% five-year average
• In aggregate, companies are reporting earnings that are 18.1% below expectations

CENTRAL BANKS

• Atlanta Fed President Bostic reiterates cautious view with rate cuts (Bloomberg)
• Economists say see four ECB rate cuts in 2024 and three in 2025 (Bloomberg)
• India Central Bank won't consider rate cuts until inflation below 4% (Bloomberg)

GEOPOLITICS

• Biden admits US airstrikes have not halted attacks from Yemen (Bloomberg)
• Israel PM Netanyahu rejects calls for establishment of Palestinian state (NY Times)
• NATO to conduct biggest war drills since Cold War with 90,000 troops (Reuters)
• Diplomats from US and China urge Pakistan and Iran to show restraint (Bloomberg)

CHINA

• China's biggest brokerage suspends short sales following sell-off (Bloomberg)
• Chinese mutual fund closures at five-year high (Bloomberg)
• China tells heavily indebted local governments to delay or halt some debt-funded infrastructure projects (Reuters)
• China's aging population threatens goals of transition to new economic growth model (Reuters)

ECONOMY

• Red Sea crisis pressures China's exporters due to delays and costs (Reuters)
• Japan core inflation eases in-line with expectations (Reuters)
• UK retail sales fell at fastest pace since Covid-19 lockdowns (Bloomberg)
• US consumer confidence jumps to near three year high, marks largest month-on-month increase in 19 years (Reuters)
  
  

Sectors to Watch

Tech: Overnight tech outperformance could see some follow through strength for local names, most of which had a pretty strong performance last Friday. Notably Xero (+4.8%), Wisetech (+2.9%), Altium (+2.8%) and TechnologyOne (+2.8%).

Financials: The SPDR Financials (US financials index) rallied 1.6% overnight, back towards recent highs – Its chart is a splitting image of CBA (massive late October to late December rally followed by sideways movement). Let's see if there's more gains to be made for local banks, including CBA and ANZ – Both of which hit all-time highs last week.

Uranium and battery metals: These were among the worst performing ETFs in our above watchlist. Of course, one is pulling back after a massive rally and other is tumbling into oblivion.

We Are So Back

Here are some interesting data points from Carson Group about the S&P 500's record close.

• S&P 500 is up around 2% year-to-date yet ~60% of its constituents have a negative year-to-date return
• The Magnificent 7 is up an average of almost 4% year-to-date, led by a 23% year-to-date gain from Nvidia
• While we have been in a little bit of a drought for fresh all-time highs – They surprisingly happen quite often – In fact, 7.0% of all trading days since 1957 have seen record highs

Average S&P 500 performance after making a new all-time high since 1957:

Carson Group's Ryan Detrick also dig up how the S&P 500 performed after an all-time high drought (since 1957 there were 13 instances where it went more than a year without a record high):

• 1-Month: Up 0.9%, higher 69.2% of the time
• 3-Month: Up 2.9%, higher 92.3% of the time
• 6-Month: Up 6.6%, higher 76.9% of the time
• 12-Month: Up 11.8%, higher 92.3% of the time

The Case for Investing in Commodities

Commodities as in physical commodities/spot prices vs. miners.

I came across an interesting view from Twitter user Paulo Macro: "The key to this commodity supercycle is supply underinvestment and disruption, not demand. I start with the principle that I want to be as close to the physical as possible. Equities will not give people the torque they grew to expect in the 2000s cycle."

This is an interesting perspective because miners are struggling amid factors such as labour shortages, outsized capex requirements and worsening geology. In recent weeks, we've seen a number of major names miss or downgrade production, including Codelco (world's largest copper miner), Kazatomprom and Cameco (world's largest uranium miners) and Aloca/Alumina (one of the world's largest alumina producers).

KEY EVENTS

ASX corporate actions occurring today: