Charles-Henry Monchau

Chief Investment Officer

Chart #1 — 

Another (slightly) positive week for US equities

The Dow Jones rose for the fourth week in a row. Despite signals of a slowing global economy, markets welcomed the deceleration in inflation figures (see next item). The first quarter earnings season kicked off on Friday with the release of figures from banking giants JP Morgan Chase, Wells Fargo and Citigroup. All three companies beat consensus estimates, which provided relief to investors. 
The S&P 500 continues to move in a bullish channel in place since the low point reached during the SBV bank debacle. The next resistance is at 4.200. A successful test of this resistance could force investors currently underinvested in stocks or net short to "chase the upside".

S&P 500 index chart

Picture1 - Copy

Source: Bloomberg, The Market Ear 

Chart #2 — 

US inflation continues to decelerate


The most anticipated number of the week was Wednesday's release of the U.S. inflation report (CPI) for March. Headline CPI rose only 0.1% on a sequential basis, slightly less than expected. On a rolling year basis, the rate is now 5.0%, the slowest pace of price increases since May 2021. 

On Thursday, another encouraging U.S. inflation statistic delighted investors. It was the rate of price increases on the producer side. The core PPI index fell 0.1% in March, marking the first decline since the height of the confines in April 2020.

Core CPI over a sliding year (in yellow) and Core PPI over a sliding year (in blue).

Picture2 - Copy

Source: Edward Jones, Factset

Chart #3 — 

US retail sales in March declined by 1% MoM

Retail sales in the United States were disappointing. In March, retail sales rose by only 1.5% year-on-year, the weakest growth rate since May 2020 and well below the historical average of 4.8%. After adjusting for inflation, the picture is much worse. Real retail sales have fallen 3.3% over the past year, the seventh consecutive year-over-year decline. The U.S. consumer, which accounts for about 80% of the economy, continues to suffer from rising prices.

U.S. retail sales on a nominal year-over-year basis (blue) and on an actual year-over-year basis (red)

Picture3 - Copy

Source: Charlie Bilello 

Chart #4 — 

Some signs of easing on the US banking crisis side


US banks' requests for liquidity from the US Federal Reserve are down for the 4th week in a row. Let's see if the first quarter results of US banks confirm that the bulk of the banking crisis is indeed behind us.

Picture4 - Copy

Source: Bloomberg, Federal Reserve 

Chart #5 — 

The probability of a 25 basis point rate hike by the Fed in May is now 85%


The Fed meets again on May 3 and the market is currently pricing in an 85% chance of a 10th rate hike (25 basis point increase to 5.00-5.25%). When was the last time we saw U.S. interest rates above 5%? It was September 2007…


Source: Charlie Bilello 

Chart #6 — 

Ferrari and LVMH shares reach all-time highs


Following the release of record quarterly figures (sales up +17% year-on-year), LVMH shares reached a new all-time high on the Paris stock exchange, positioning the company among the top 10 global companies in terms of market capitalization (444 billion euros). In addition, Bloomberg notes that LVMH's strong numbers were boosted by Chinese shoppers rushing to buy luxury goods after the Covid pandemic-related lockdown. Bernard Arnault remains the richest man in the world with a fortune that now stands at$210 billion. The luxury sector is doing well as the Ferrari stock has also reached a new historical high. Ferrari stock is now trading at a higher Price to Sales and Price to Earnings multiples than Tesla (9.7x vs. 7.9x and 52.7x vs. 51.3x respectively).


Source: Charlie Bilello

Chart #7 — 

Ether breaks $2,000 and outperforms bitcoin on the week



Crypto-currencies had a good week, surpassing a market capitalization of $1.3 trillion. Bitcoin (BTC) held above 
$30,000, reaching $31,000 on Thursday night. But it was ether (ETH) that was the big winner of the week, surpassing $2100, up more than 12% over the past 7 days. 
As a reminder, an important update on the Ethereum blockchain took place on Wednesday. This is the "Shanghai" update.  Since December 2020, validators can deposit 
("staker") 32 ethers on the Ethereum blockchain to secure it. Today, Ethereum has more than 562,000 validators, who have "staked" more than 18 million ethers. 
Thanks to Shanghai, these 18 million ethers (equivalent to 33 billion dollars at the current price) can be recovered by their owners (the validators). Before this update, the market feared that some validators could take advantage of this update to sell their ethers, acquired cheaper than the current price. 

But the massive sale of ether did not happen, which caused a significant rebound in ether. As the chart below shows, the ether underperformed bitcoin before the update but has outperformed bitcoin since Wednesday.



Source: Bloomberg, 


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