The first week of 2022 was already impactful for investors. The S&P 500 fell by 1% in this week alone, it is important to notice that the index is rotating beneath the surface with value stocks such as industrials or financials outperforming and growth stocks like information technology and consumer discretionary underperforming.
sources: Edward Jones, 7 Jan 2022
These changes are mainly due to yields rises in U.S. government backed bonds, increasing from 1.34% to 1.75%. As you will see in the article we will soon publish, yields have a strong impact on specific categories of stocks. Explaining the performance of the Nasdaq composite (more exposed to growth stocks) which fell by 5.06% this week.
Also in the U.S. Job data of December disappointed investors as the country added 199,000 jobs last month, far from the 400,000 economists had forecasted, considering that 4.5 millions people quit their jobs in November, the U.S. is clearly shifting to a tighter job market, beneficial for employees. This record number of people quitting their job has been coined; The Great Resignation or The Big Quit.
In Europe, stocks were less volatile, worries that central banks might reduce asset purchase and increase interest rate have impacted markets, together with fears of the Omicron variant. Many countries have taken decisions, like mandatory vaccination for people aged 50+ in Italy, Spain deploying the army to help increase vaccination rate and the Netherlands suffering from large-scale protests against the lockdown. Additionally Eurostat published Friday its most recent inflation update, showing an annual rate of 5% over the whole region.
In China more pressure is applied to property developers, where several suffer from a liquidity squeeze due to high debt and a slow housing market.The infamous Evergrande has already missed an offshore bond repayment of 82.5 Billions dollars but has not yet missed payments on onshore bonds, the company is set to ask for a delay for the payment of some of its debt this week to its creditors.
The result is out and we have a winner; Heij Fidelity. Despite great last minute efforts by both Hercules and De Ruyter Capital, Heij Fidelity came out on top. Congratulations!!
A special mention must also be made to Batavia Investments for coming stone dead last, great job!
I hope you enjoyed this competition and now we will go on to the next one with real money. I hope, especially for the right row, that you will do better in the next competition. Good luck and see you next week.