This week we've got an exciting analysis and outlook on interest rates. We'll also breakdown the year-to-date performance of U.S. stocks by sector. The results might surprise you. Finally, we'll provide an overview of the crypto market.
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Over the past few weeks, the situation regarding regional banks in the U.S. has become more stable. Interest rates continue to climb and they're fast approaching 5%, the highest point since March 2007.
Inflation has continued to slow for the ninth month in a row and dropped below 5%. This is a positive sign for the overall economy as it may prompt the Federal Reserve to adopt a more accommodating approach. This could lead to a decrease in interest rates before the year-end. However, despite this possibility, the market still expects three more rate hikes in the coming months. When the Fed eventually shifts its stance, history indicates that rate reductions occur swiftly. Our analysis of this pattern is shown in the chart below. We've plotted all the previous Fed pivots since 1960. In green, we've plotted a potential path for interest rates over the coming months.
Let's shift our focus to the year-to-date progress of the various sectors in the United States. Our analysis involves examining the performance of each stock within a sector to ascertain the proportion that has outperformed the S&P 500. Based on the chart, it's apparent that most sectors have underperformed the broader market. Interestingly, the Non-Energy Minerals sector is the only one where the majority of stocks have outpaced the market.
The results are maybe a little less surprising when we consider that almost 50% of the return of the S&P 500 is due to the following stocks - Apple, Amazon, Nvidia, Tesla, Google, Meta, Microsoft. Let's look at a comparison of the S&P 500 with and without the mega-cap tech stocks.
Over the last few days, Bitcoin has been trading sideways after surpassing the $30k level. Meanwhile, Ethereum has experienced a significant boost, reaching the $2k milestone for the first time in almost a year, resulting in a 13.5% gain for the week. Binance Coin, Polkadot, and Ripple have also had a positive week, with their prices being influenced by their correlation to the larger assets such as Ethereum and Bitcoin.
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