Daily Brief for January 20, 2022

Daily commentary for market and investment insights

What Happened in the Markets?

The stock market opened well today and is now on course to make up for some of the heavy losses we saw yesterday. Increasing stock futures came as investors started moving their money to safer funds after the speculation that monetary policy would tighten and economic growth would slow.

The return on the 10-year Treasury, measured inversely to its price, is now at 1.84 percent, which is 0.01 percentage points higher than the previous day.

Futures markets are forecasting the US Federal Reserve will raise interest rates four times this year, with its key lending rate reaching 1 percent or higher by December.

Topdowncharts mentioned China’s benchmark interest rate cut of 10 bps to 3.70%.

20220120 China Benchmark Interest Rate Cut topdowncharts
Source: topdowncharts.com

The technology-heavy Nasdaq Composite has had an unpleasant beginning to the year, starting 2022 down 8.3%. It began Wednesday down 1.2% at 14,340.26 and is now 10.69% below its November 19 record peak, meeting the description for a correction in an asset’s performance.

The Nasdaq Composite has averaged 0.8% returns after one week when falling 10% over the past 65 times it has happened. Over the first month, returns for this benchmark are lower than usual. However, after three months and onwards, there is a gradual rise in the average gains, at 2.2%.

20220120 Nasdaq Composite Correction Marketwatch
Source: MarketWatch

Christine Lagarde, the European Central Bank president, said that because consumer prices are not as high as in America, they don’t plan to do anything as aggressive at fighting inflation. The recent bout of inflation is caused by temporary factors, not because the demand for goods has increased. The central bank sees no need to act because inflation will likely return to its typical low levels.

The VIX indicates that implied volatility is higher than usual. However, it’s less so than a few weeks ago.

Disclosure: This article expresses my own views, and I wrote the article by myself. I am not receiving compensation for it. I have no business relationship with any company whose security is mentioned in this article.

Sources: FT.com, Bloomberg, MarketWatch, WSJ.com

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The investment information, comments and recommendations contained herein are not subject to investment advice. The comments and recommendations contained herein are based on personal views. These views may not fit your financial situation and your risk and return preferences. For this reason, based only on the information contained herein, investment decisions may not have the appropriate outcome.