4 minutes read

Optimism has returned to markets, as investors review the impact of rising interest rates on businesses. The S&P 500, the Dow Jones Industrial Average and the Nasdaq Composite all had their second straight week of gains, gaining back on the losses after Russia invaded Ukraine a month ago. Major companies reporting earnings include PetroChina ADR (PTR).

WHAT’S HOT

  • Tech Companies. Tech stocks had an excellent week, with companies such as Apple (AAPL), Amazon (AMZN) and Tesla (TSLA) leading the way, with the latter up almost 12% last week. The market’s opinion is now that tech fundamentals have not changed, and that perhaps the FED ‘s policy will not have so much impact on the sector. Those companies still hold strong cash positions, which could mean dividends and buybacks this year. Alibaba (BABA), for example, just expanded its buyback program from $15 billion to $25 billion. 
  • Oil. The commodity closed by more than 8% on the week. Brent Futures closed up +7.12% on March 21, and +5.3% on March 23, mainly after news of storm damage halting exports from Kazakhstan’s Caspian Pipeline Consortium terminal, which carries 1.2 million barrels daily. US crude oil inventories keep falling, with a 2.5 million barrels draw for the week, which could pressure the price even more. This is of course good news for oil companies such as Exxon Mobil (XOM), which was up almost 8% last week. However, companies in which gas is a major cost, such as airlines, will likely suffer in the near future as their profit margins get slammed. 
  • Gold. The precious metal was up last week, although by less than 1%. Market considers it a safe haven that could protect investors from events such as the war in Ukraine, but the tight monetary policy from the FED is keeping the commodity from rising. That is because as interest rates go higher, investors lean towards interest paying assets. Mining companies such as Newmont Goldcorp (NEM) and Barrick Goldcorp (GOLD) were faring well, up 6% and 2.5% on the week, respectively. 
  • Cannabis. Ths US House of Representatives will again vote on legislation to make cannabis legal on a federal level. A previous attempt to pass such a bill failed because of opposition in the Senate, but optimism around this try led stocks such as Tilray (TLRY) up 36% and Canopy Growth (CGC) up 12% last week.

WHAT IS NOT

  • CBOE Volatility Index (VIX). The VIX is an index that represents a 30-day forward projection of volatility. It is one of the most important indexes in financial markets, as it provides a quantitative measure of investors’ sentiments. Generally, a lower VIX represents calmness, while the higher the index, the more fear in the markets. The index closed at about -9% on the week, reassuring investors. Investors can trade the VIX by buying derivatives such as the S&P 500 VIX Futures (VX) or buying ETFs with exposure to the index, such as the  ProShares Short VIX Short-Term Futures ETF (SVXY). 
  • Peace Negotiations in Ukraine. All sides are preparing for a long, debilitating war. The US and the European Union have agreed on a deal that will increase US natural gas shipments to Europe, reducing the continent’s dependence on Russian gas. This comes after Ukraine once again repeated that Russia’s demands for it to recognize Crimea’s annexation and recognize pro-Russia separatist states are unacceptable. 
  • US Housing Market. Indicators show that the market is cooling as house price and mortgage rates increase. Pending home sales dropped -4.1% in February, for the fourth straight month. Also, the average rate on 30-year mortgages surged to 4.59%, the highest level since 2019. 
  • Financial Sector. Banking and capital markets stocks did not have a great week, with names such as Goldman Sachs (GS) falling -1% and Citigroup (C) falling about  -0.6% on the week, even after a sector wide recovery on Friday.

WHAT IS AHEAD

  • Exchange Rate (USD/BRL). The exchange rate between the Brazilian Real and the Dollar closed below R$5,00 in almost a year. It is the best beginning of a year since 2009. The movement is mainly a consequence of successive interest  hikes by the Brazilian Central Bank, with the Brazilian interest rate (SELIC) now  at 11.75%. The high interest attracts international investors, who have to buy Reais in order to invest in the country. The low exchange rate makes investing abroad ideal, as real deposits are now worth more in dollars.  
  • Bitcoin (BTC) and Ether (ETH). Sentiment is positive across crypto markets as bulls have managed to get BTC back to $44,000 and ETH reaches $3,100. To consolidate the new trend, BTC has to break above the $44,000-$46,000 zone in the next few days. For ETH, the new test will be the $3,125 level. If the price drops, $2,975 could turn into a re-entry zone. However, traders should be cautious and a pullback could mean a retraction to the $2,600 area. 
  • Economic Calendar. Investors should keep an eye on the CB Consumer Confidence Index coming out on March 29. It is a leading indicator used to predict consumer spending, which is very important to economic activity. US GDP and US Oil Inventories come out on March 30, and US Unemployment Rate comes out on April 1st. 
  • War in Ukraine. The development of the war will still play a major role in several aspects of economic activity, such as oil and commodity prices, as well as supply chain concerns. It should become more clear in the next few weeks whether the conflict will end soon or drag on.

PASSCAST THIS WEEK!

The Passfolio PassCast is back for episode #5! Get the latest on crypto, stocks and investing from Kalu Alu. Get your week started right with the PassCast!

https://www.youtube.com/channel/UCmxFLkAVUzLYS1Y8Vrbz_jA

DIVIDENDS

Companies with biggest boost to dividend payouts:

  • Ternium (TX) from $0.80 to US$1.80
  • Columbus McKinnon (CMCO) from $0.06 to $0.07
  • Prudential (PUK) from $0.1610 to $0.2372

Main payments this week:

Monday (3/28) – Shell ADR (SHEL), Moelis & Co (MC), AstraZeneca (AZN)

Thursday (3/31) – Union Pacific (UNP)

Friday (4/01) – Fedex (FDX), Coca-Cola (KO)

STAY IN THE LOOP!

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Keep in mind that different investments carry different levels of risk. Past gains do not guarantee future returns. Every investment should be carefully studied, in order to understand if a certain investment is the right fit for you.