Anzo Capital: Weekly Market Review

[Anzo Capital]

Weekly Market Review by Anzo Capital
Reflecting on the week of 01 Nov 2021

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The Wait Is Over

The US labour market looks to be making a moderate recovery with 531,000 new jobs added in October, against a forecast 450,000. Another 235,000 was also added to September’s data indicating that after a long period of weakness, the jobs market may be turning a corner. The rise will make a dent in the recovery of the 22 million jobs that were lost during the pandemic. At the November FOMC meeting, the Fed predictably announced that it will begin to taper $15 billion in bond purchases each month, starting this month. The current purchasing rate stands at $210 billion per month. The committee also recognised the persistence of inflationary pressures although no change was made to the Fed Funds rate at this meeting. The Fed will now have a task of managing inflation expectations.

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[Anzo Capital]

Weekly Market Review by Anzo Capital
Reflecting on the week of 08 Nov 2021

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All Bets On An Early Fed Rate Hike

Futures markets have priced in a July 2022 rate hike from the Fed after October’s inflation numbers surprised to the upside. Consumer prices climbed 0.9% for the month against a forecasted 0.6% rise. Annualized rates have now soared well beyond the price stability mandate of 1-3% annualized inflation. The Fed has stated aims to complete the tapering of its asset repurchasing program by the middle of next year, with interest rate hikes expected soon after. Despite the holiday season and associated hiring trends, unemployment claims unexpectedly moved higher in the week ending 6th November. A total of 267,000 new claims were recorded representing a drop of 4,000 on the previous week, indicating that a moderate recovery is still underway for the U.S. labour market.

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[Anzo Capital]

Weekly Market Review by Anzo Capital
Reflecting on the week of 15 Nov 2021

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US Spenders Out In Force

Despite a backdrop of falling consumer confidence in the U.S., consumer spending remained elevated in October, with a rise of 1.7% when compared with September’s figures. Leading the surge, was the energy sector due to rising prices at gasoline pumps which saw the subcomponent register a 3.9% rise. Spending also remained higher in sectors recovering from lockdown restrictions with the food and beverage and hospitality sectors enjoying a rebound in demand. Rising incomes should result in a strong quarter of growth for the last three months of the year. These strong growth prospects were further confirmed by a sharp rise in output from manufacturers. The most notable component for growth was the motor vehicles and parts which rocketed to an 11% rise for October.

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[Anzo Capital]

Weekly Market Review by Anzo Capital
Reflecting on the week of 22 Nov 2021

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Will Omicron Put The Brakes On A Global Recovery?

Private sector growth in Germany continues to accelerate, as new work continues to roll in albeit at a more moderate pace. Inflationary pressures are being felt by manufacturers, as supply shortages continue to hamper output. Momentum loss from the second and third quarter was further confirmed in November with 52.8% growth. The rise in coronavirus cases and now a new variant named Omicron have impacted business sentiment in Germany which fell for the fifth month in a row in November. The Ifo Business Climate report declined to 96.5 points.

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[Anzo Capital]

Weekly Market Review by Anzo Capital
Reflecting on the week of 29 Nov 2021

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US Employers Struggle To Find Workers

U.S. jobs numbers disappointed last week, indicating that only 210,000 new jobs were added in November, against a forecast of 553,000. Staff shortages continue to be a persistent problem for companies looking to hire, which will likely result in upward wage pressures. The result, will be higher costs for customers. Professional and business services represented the majority of the gains with the transportation sector also enjoying a strong month of growth and job creation. The hardest hit sector was retail which lost jobs despite entering into the biggest shopping period of the year. The unemployment rate fell to 4.2% which was a positive surprise but is likely resulting from low labour market participation.

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[Anzo Capital]

Weekly Market Review by Anzo Capital
Reflecting on the week of 03 Jan 2022

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Fed Set To Pull The Trigger

Minutes from the December FOMC meeting revealed a change in stance, switching from an ultra easy policy approach to a quick readiness to use monetary policy tightening measures, such as interest rate increases. Projections suggest the first rate hike could come as early as May 2022. The change has been accelerated by higher-than-expected inflation numbers and the move towards a stabilisation in labour markets. The Fed also highlighted the need to reduce the balance sheet, which is expected to complement a rise in the Fed Funds rate and is projected to move at a faster pace than originally forecast. Labour shortages continue to plague the labour market with only 199,000 new jobs added for December against a forecasted 426,000. Employers are struggling to find staff and this will put upward pressure on wages further setting the tone for a rate increase from the Fed.

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[Anzo Capital]

Weekly Market Review by Anzo Capital
Reflecting on the week of 10 Jan 2022

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Growth Worries For US Economy

Cost of living pressures appear to be impacting U.S. consumers, as spiking inflation numbers resulted in a slump in retail sales. Sales saw the sharpest decline in 10 months, with 10 of the 13 components that make up the index falling during the month, thereby reflecting widescale weakness. Inflation spiked by 7% year-on-year in 2021, representing the sharpest increase in consumer prices since 1982. Shortages of goods and labour have resulted in rising prices and wages, which are then passed on to the customer. Given the spread of the Omicron variant, labour shortages are likely to persist, indicating price pressures will remain. There was an uptick in new unemployment benefit claims in the week ending 8th of January, as 230,000 claimants filed for jobless support, indicating that lay-offs may be rising amidst another surge in coronavirus cases.

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[Anzo Capital]

Weekly Market Review by Anzo Capital
Reflecting on the week of 17 Jan 2022

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China Growth Worries

China’s economic growth hit the slowest pace in 18 months during the last quarter of 2021. The slowdown was attributed to waning demand in the property sector, debt curbs and movement restriction policies in light of new covid-19 variants. For the quarter, 4% growth was achieved, with annual growth figures revealing a pace of 8.1% output. Domestic demand continues to weigh on growth, as retail sales registered a 1.7% year-on-year increase against a forecast of 3.8%. The drop in demand has been facilitated by lockdowns, however, with foreign demand remaining patchy, GDP figures may remain soft as we move through 2022.

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[Anzo Capital]

Weekly Market Review by Anzo Capital
Reflecting on the week of 31 Jan 2022

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US Economy Back On Track?

Despite a disappointing ADP payroll number, new job creation soared in January despite the backdrop of climbing covid-19 cases as a result of the new Omicron variant. A total of 450,000 new jobs were added to the US economy for the month with the leisure and hospitality sector leading the way as the largest contributor. Wages also accelerated by 5.68% year-on-year in January, likely boosted by another month of expansion in the Manufacturing sector where wages tend to be higher. The sector grew by 57.6% for the month of January with the employment index reaching 54.5%.

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[Anzo Capital]

Weekly Market Review by Anzo Capital
Reflecting on the week of 07 Feb 2022

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Place Your Bets Now

All bets are on for a March Fed Funds rate hike after CPI data indicated that inflationary pressures are still not transitory and are likely to persist. Core CPI numbers for January had prices rising at 0.6% month-on-month and 7.5% when compared with the same period last year, representing the sharpest rise in prices since 1982. Food prices, rents and energy represented the fastest growing components of the index. The US trade deficit widened to record levels in 2021 as a surge in imports of merchandise saw the deficit climb 26.9% as spending shifted from services to goods.

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