The final week of November ended in green for most US and EU stock indices, although increases were not substantial. The S&P500 increased by 1.13%, Dow Jones by only 0.12%, and the NASDAQ by 2.09%. Similarly, EURO STOXX 600 increased by 0.85%, and the AEX by 2%.
The labor market managed to surpass expectations during the month of November. Figures display that labor demand has been strong and that unemployment rates took a downturn in Western markets. The jobless claims in the EU and the US showed significant improvement. The U.S Initial Jobless claims beat expectations with 225,000 new claims, and a reduction of 142,000 unemployed people was seen in the Eurozone. Despite this improvement, the ECB remains concerned about the economy, staying cautious of a possible economic downturn that could shake the unemployment rate. In an environment with high inflation and increasing interest rates, an increase in jobless people could mean that many households may face problems repaying debt. Economists also warn that unemployment rates may not stay as low in the following months, mainly due to the energy crisis that came upon the markets with Russia’s invasion of Ukraine.
The energy shock brought many problems to the markets, primarily to those in Europe. The Russian invasion has been one of the top sources of concern and volatility. In contrast, recent findings suggest that Europe adapted well to this crisis. According to Eurostat, the EU has never produced manufactured goods as much as it does today.
Another significant development came from the real estate market this week. Investors clamored to liquidate their holdings due to deep concerns about the future of property markets. Blackstone, one of the largest investment banking firms, has limited withdrawals from its $125bn real estate investment trust (REIT). It’s important to remember that increasing rates directly affect mortgages, and it’s plausible to expect a fall in the property market, given the current economic environment.
The Federal Reserve has been taking cautious steps with its QT policies, aiming to reduce the side effects on economic activity. Regarding interest rates, Powell has signaled that the rate increases will follow a slower pace in the upcoming months. Starting in December, increases will likely be by half a point instead of the regular 0.75 that we got used to seeing during the past months. This may not come as a shock after the low inflation figures in November, which finally showed some improvement. Despite this signal from Powell, a slowdown doesn’t mean the central bank will be dovish. Quantitative tightening has been deemed necessary by Powell, and the numbers on the SOMA holdings (FED’s balance sheet), although way later than said, started dropping faster. A pivot still seems far for the Federal Reserve.
Flow Traders Investment Competition Update
Tonight, it’s pakjesavond, a night where ‘Sinterklaas’ rewards those who have been sweet this year and punishes those who have not. Today, the gifts have arrived early for some investment groups. First, Aurelia, they are still leading the competition, even beating the markets this week! Next to that we have Hercules, rising 12 places last week. Hopefully they can keep this trend going throughout the year. On the other hand, we have the investment groups for who gifts were not of the order this year. These were CFQ and Aevitas. Both groups fell 11 places last week and are now at the bottom of the competition as the only groups below them have not invested any money yet. Let’s hope Santa Claus has something better for them in store!