The Federal Reserve (FED) started its promised interest rate hikes to curb inflation after Jerome Powell said that he would “take the necessary steps to ensure that high inflation does not become entrenched” earlier this month. Also, the war in Ukraine has reached its fourth week, and estimates of Ukrainian and Russian soldiers’ deaths reached 8,500 people.
- Interest rates: The FED raised interest rates for the first time since 2018, and the rate stands at 0.25-0.5% now. This probably will have little impact on markets in the short term, as the move was well telegraphed by the central bank. This will make life even more difficult for tech companies, as they have to grow even faster to justify their valuations. The move also impacted the mortgage market, and the rate on a 30-year fixed mortgage just went above 4% for the first time since 2019.
- Oil: Ceasefire talks between Russia and Ukraine did not progress, which made markets nervous about continued disruption to oil supply. Brent oil futures rose almost 9% on March 17, the largest percentage gain since 2020. However, gains are expected to come with high volatility and the price will most likely have strong ups and downs on its way up.
- China’s policy on Covid promises to tangle world supply chains. While most countries are looking at a post-COVID life, China is constraining 17.5M residents to a weeklong lockdown. Apple (AAPL) shares fell almost 3% on March 14 as the markets feared difficulties in smartphone production. Car makers will also feel directly the impact of closed factories. To minimize such problems in the future, the House passed a $52B bill to promote US manufacturing.
- The Russian economy continues to feel the impact of sanctions. Russia’s central bank kept the interest rate at 20% after raising it from 9.5% on Feb. 28, but warned about inflation and a looming economic contraction. Russia represents only 3.1% of the world GDP, so a deterioration on the Russian economy will have little direct impact on markets. However, volatility may increase in the next few months as relations with the West deteriorate, causing concerns over oil price and supply chain.
- Gold was heading for the biggest weekly fall since November, as of Friday. The demand for non-interest-paying safe-haven assets cooled after the FED rate spike, with investors preferring fixed income products. As of this writing, gold faced a -2.4% hit on the week, with spot gold falling almost 0.3%.
- Bitcoin (BTC) is persistently trading in the $40,000 zone, and as of Friday last week daily timeframes were practically unmoved. The volatility was evident in March 16, when the price shot up $3,000 to almost $42,000, only to rapidly fall back to just under $39,000. Traders should keep a close eye to see if this consolidation leads to a continued bear market or is the start of a bullish trend.
- Remote work is rapidly declining in the US, as workers are returning to their cubicles in the new endemic phase of Covid. Office occupancy is at 38%. On one hand, working from home increases happiness and productivity. On the other hand, remote workers are less likely to be promoted when compared to peers working in the office. As companies decide on their model, investors should keep an eye on the trend to assess the impact on stocks such as Zoom (ZM).
Companies expected to boost quarterly dividend payouts:
Angel Oak Mortgage (AOMR) from $0.36 to $0.45
Bassett Furniture Industries (BSET) from $0.25 to $1.50
GeoPark (GPRK) from $0.041 to $0.082
Wingstop (WING) from $3.17 to $4.00
Bestbuy (BBY) from $0.7 to $0.88
Equity Lifestyle Properties (ELS) from $0.3625 to $0.41
Dentsply Sirona (XRAY) from $0.11 to $0.125
Pembina Pipeline (PBA) from $0.1650 to $0.1660
American Vanguard (AVD) from $0.02 to $0.025
Pearson (PSO) from $0.0875 to $0.1894
Arcos Dorados (ARCO) from $0.03 to $0.04
Novo Nordisk (NVO) from $0.5571 to $0.7410
Hurco Companies (HURC) from $0.14 to $0.15
Guaranty Bancshares (GNTY) from $0.20 to $0.22
EARNINGS THIS WEEK
Monday (3/21) – Amkor (AMKR)
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@FinPlanKaluAja1 discusses what is happening with commodity prices, US inflation and what to expect this week from the US market.
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