The stock market is not the economy. For better and... for worse? Javier Molina, senior market analyst at eToro, analyzes the last week of 2023.
On the verge of closing a stock market year where the headline could be “the year everything went up” despite the economic recession that was anticipated and never came in the USA, we have once again confirmed that the stock market is not the economy and that is how we must understand it.
After some spectacular months of November and December, the “everything rally” caused that what suffered the most in 2022, has been what has had the most shine in 2023, with a bitcoin (BTC) rising more than 163%, a Nasdaq 100 54% or an SP500 that will close with more than 25% revaluation. Even cash (BIL) has generated 5% in 2023. The only exception was commodities (DBC) which recorded a small loss, a drastic change compared to the large war-driven gains in 2022.
Notably, it was a record year for both cash flows and Treasuries. Money market funds attracted more than $1.3 trillion due to high returns and widespread risk aversion that persisted among a large portion of investors.
In reality, many have missed this bullish year waiting for that economic crisis that has not materialized. And the stock markets have risen, a lot, without them. Now, following history, they will end up entering risk markets at a time of euphoria, at historical highs and it will be the signal that indicates the end of the trend.
The year ends with CPI growth data in the USA, which was only 0.1% in November, below the official consensus of 0.2%. Furthermore, compared to the previous year, inflation stands at 3.15%, the lowest since March 2021. Likewise, the personal consumption price index (PCE) decreased by 0.1% compared to the previous month, marking the first drop since the start of the pandemic. However, as the Federal Reserve has communicated, the future outlook remains uncertain and the situation needs to continue to be monitored.
We cannot finish without taking a look at the star sector of 2023: technology in the USA. After an exceptional year, many warn of the possibility of a bubble in the sector with the main stocks overvalued and with an increasing weighting of the US market. While it is possible that the sector could benefit from rate declines, if a recession occurs and it is discovered that these companies have greater exposure to economic cyclicality than previously thought, securities could be devalued.
Key technical levels for the week
THEY ARE NOT INVESTMENT RECOMMENDATIONS. Only comments from a technical informative point of view.
1.- S&P
From a technical point of view, first signs of exhaustion between suspicious increases in volatility, levels of maximum euphoria and a first control zone that remains at 4770 points.
While it is true that the high levels of overbought have reduced, we remain at elevated levels as we observe the first weekly outflow of equity flows.
If the previous zone is surpassed, the market will continue in the zone of all-time highs. Below, 4600 marks the first support level and losing 4540 would raise doubts about future movements.
IBEX-35
From a technical point of view, the Ibex continues to consolidate the strong previous movements. If the 10,000 points hold, we can move on to narrower movements with a resistance zone at 10250.
The weakness and exhaustion of sectors such as banking will be key when it comes to accentuating one movement or another. The previous high level of overbought has been corrected and serious inflows will now be needed to continue thinking about new increases.
3.- BITCOIN (BTC)
From a technical point of view, we continue in the consolidation movement limited by 40,000 and 44,000USD. We are still waiting for definitive news on ETFs and we have moved into a #fomo mode where we are seeing flows that go towards the “ #Altcoins ” that remind us so much of the end of bullish cycles.
But... we follow the prices, the only valid clue, and as long as we are in that range we do not operate. Above, if it exceeds 44,000 we will go directly to the 48,000-50,000USD zone. Below, target at 38,000USD first and 31,500USD as the next important reference.
Source: Territorioblockchain.com
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