Markets News

Question 1

S&P 500 recent performance

Answer 1

Falling -> rates hikes, geopolitical risks and mediocre earnings

-10% from summer peak

Question 2

US stock market performance first seven months

Answer 2

Very well -> driven by enthusiasm about artificial intelligence and optimism that the Fed was approaching end of rate hike campaign

Question 3

Alphabet Earnings

Answer 3

-10% on Wednesday
- Narrowly missed revenue forecasts in one division

Question 4

S&P 500 annual performance after earnings

Answer 4

up 7% YTD, +15% v nadir during last year’s bear market

Question 5

Rates impact on S&P 500

Answer 5

Higher rates -> reduces valuations -> impact on earnings forecasts due to higher discount rate -> more pronounced for growth stocks

Question 6

Impact on Yields

Answer 6

Yields up -> 20y treasury bonds at highest levels in 16 years -> above 5%

Question 7

How asset managers reacted to higher treasury yields

Answer 7

Lots of buying -> betting that the pain in the treasury market is almost over + slowdown in the US economy is on the horizon

Question 8

Current US economy performance

Answer 8

Annualised growth rate: +4.9% in Q3

Question 9

US economy performance impact on yields

Answer 9

Yields up -> Fed indicated in dot plot from September meeting that officials were expecting slower path towards interest rate cuts in 2024 & 2025

• Yields up -> growing concerns over US government’s near 2tn annual budget deficit

Question 10

Market expectation for Interest rate cut

Answer 10

Q4 2024

Question 11

Bund 10yr yield

Answer 11

2.88%

Question 12

Gilt 10yr yield

Answer 12

4.63%

Question 13

T bond 10yr v 2yr

Answer 13

10yr - 4.8% v 2yr - 5% -> inverted

Question 14

10yr treasury yield last 10 years

Answer 14

Large QE -> slowdown of economic activity -> monetary policy -> don’t cut rates -> decrease the yield curve by buying gov bonds -> high price with low yield

Question 15

Impact of bonds supply on yields in normal times

Answer 15

No impact