📉The Big Bang💊
The equity market went on a roller coaster ride as it reversed all gains for the session after the first confirmed US case of the Omicron variant in California.
Technology rich Nasdaq led the fall with the S&P 500, and Dow Jones sank sharply. Investors are logically worried about how this variant could affect the economy and if the Fed will take any action to alleviate the impact.
💡We need You🔦
Well, that’s what the Market is calling on Uncle Powell. The real possibility that the Fed has shifted its monetary policy stance to a less generous nature is causing market participants to be nervous. It might be the case that even with the Omicron variant, the Fed is resolved to proceed with fastening the pace of tapering.
⏳Treasury Yield Climbing⏱
With the bets that the Fed will hike short term interest rate multiple times in 2022, the 1 year Treasury yield rose decisively by 0.26%. On the other hand, the 10 year Treasury yield fell to 1.42%, given that the rate hikes have a dampening effect on economic demand and inflation in the longer term.
Notably, the spread between the 10 year and 2 year Treasury yield is tightening to the smallest level since Jan 5 , which was a period before the re-inflation and sudden jump in demand drops into the Market. This does not bode well for the economy when the yield curve starts to flatten as it hints on a poorer market sentiments by investors into the future.
💈Thoughts on the Market🕯
The economic data showed that the US had added about 534,000 private-sector jobs in November, beating estimates. Good news is perhaps bad news now, given that it gives the Fed more ammunition to lower support to the Market and economy.
Nonetheless, Pika World maintains exposure to the equity market and initiate tiny shopping at this moment. We believe that baring any dramatic result from Omicron; the dips present a valuable opportunity for long term investors.
We hope you enjoy this read. Pika World wishes everyone a safe trading week.
Cheers,
Pika Nat
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