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Wall Street was downbeat in December, given a muted Santa Clause Rally. The S&P 500 was off 5.7%, the Dow Jones lost 3.7%, the Nasdaq Composite retreated about 8.7% and the Russell 2000 fell about 7% in the past month (as of Dec 30, 2022).
In fact, the month snapped two consecutive months of gains. While recession fears were triggered by the relentless market forecasts, rising COVID cases in China and the advent of a new sub-variant of the Omicron COVID-19 virus also resulted in the market slump.
Against this backdrop, below we highlight a few top ETF stories of December that could be under watch in January.
Fed to Continue Rate Hike
The Federal Reserve, the European Central Bank and the Bank of Japan all sounded hawkish in December. The Fed hiked rates by 50 bps in December after four straight 75 bps increases. The policymakers also forecast that their key short-term rate will reach a range of 5% to 5.25% by the end of 2023, before being slashed to 4.1% in 2024.
The next Federal Reserve meeting will be held in the new year from Jan 31 to Feb 1. There is about a 67.7% chance of a 25-bps rate increase, per CME FedWatch Tool and a 32.3% chance of a 50-bp rate hike. Simplify Interest Rate Hedge ETF (PFIX - Free Report) should thus register gains.
Rise in COVID-19 Cases in China
China has been witnessing a huge Covid wave. Per UK-based research firm Airfinity, infections will touch their first peak in China on Jan 13, as quoted in Times of India. According to the company’s predictive health analytics, the toll since December will increase to 584,000 by the end of January and further increase to 1.7 million by the end of April. More nations are expected to impose travel restrictions on China. iShares China Large-Cap ETF (FXI - Free Report) may not be ready for a solid turnaround in early January.
Energy Continue to Grab Spotlight
WTI crude ETFUnited States Oil Fund LP (USO - Free Report) lost 0.2% last month (as of Dec 30, 2022). With demand from China likely to remain unstable due to Covid, oil prices may witness lower demand. But then Russia may reduce output and prices of oil may start rebounding from January. Another reason for the expected jump in prices is Winter Storm Elliott, which sent around 1.5 million bpd of refinery capacity in the U.S. Gulf Coast offline, per financial express. Plus, despite a rise in COVID cases, China announced an easing of its travel quarantine rules.
Platinum to Continue its Run
Platinum surged to its best quarter since 2008, per CNBC. China has imported excessive amounts of platinum since 2019, according to the World Platinum Investment Council, quoted on CNBC. The Council anticipates a platinum deficit in 2023, with demand growing by 19% but supply increasing by just 2%. Graniteshares Platinum Shares ETF (PLTM - Free Report) is expected to continue its winning stretch.
Agricultural Commodities to Win?
Though many commodities may see sluggish demand in 2023, agricultural commodities are likely to be an exception. Prices of grains have lowered from their recent highs but their direction in the coming months depends on the events in the Black Sea region, in particular any further extensions of the agreement that allows Ukrainian wheat exports to transit via Black Sea shipping corridors despite the Russian blockade of Ukrainian ports.
The Russia-Ukraine war will also have an indirect impact on coffee, cocoa and tea prices through high fertilizer prices and resulting shortages, per eiu.com. iPatha.B Grains Subindex TR ETN and MLCX Grains Index TR ETN Elements should thus be under watch. Both ETFs gained mildly in December.
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Top ETF Stories of December to Watch in January
Wall Street was downbeat in December, given a muted Santa Clause Rally. The S&P 500 was off 5.7%, the Dow Jones lost 3.7%, the Nasdaq Composite retreated about 8.7% and the Russell 2000 fell about 7% in the past month (as of Dec 30, 2022).
In fact, the month snapped two consecutive months of gains. While recession fears were triggered by the relentless market forecasts, rising COVID cases in China and the advent of a new sub-variant of the Omicron COVID-19 virus also resulted in the market slump.
Against this backdrop, below we highlight a few top ETF stories of December that could be under watch in January.
Fed to Continue Rate Hike
The Federal Reserve, the European Central Bank and the Bank of Japan all sounded hawkish in December. The Fed hiked rates by 50 bps in December after four straight 75 bps increases. The policymakers also forecast that their key short-term rate will reach a range of 5% to 5.25% by the end of 2023, before being slashed to 4.1% in 2024.
The next Federal Reserve meeting will be held in the new year from Jan 31 to Feb 1. There is about a 67.7% chance of a 25-bps rate increase, per CME FedWatch Tool and a 32.3% chance of a 50-bp rate hike. Simplify Interest Rate Hedge ETF (PFIX - Free Report) should thus register gains.
Rise in COVID-19 Cases in China
China has been witnessing a huge Covid wave. Per UK-based research firm Airfinity, infections will touch their first peak in China on Jan 13, as quoted in Times of India. According to the company’s predictive health analytics, the toll since December will increase to 584,000 by the end of January and further increase to 1.7 million by the end of April. More nations are expected to impose travel restrictions on China. iShares China Large-Cap ETF (FXI - Free Report) may not be ready for a solid turnaround in early January.
Energy Continue to Grab Spotlight
WTI crude ETFUnited States Oil Fund LP (USO - Free Report) lost 0.2% last month (as of Dec 30, 2022). With demand from China likely to remain unstable due to Covid, oil prices may witness lower demand. But then Russia may reduce output and prices of oil may start rebounding from January. Another reason for the expected jump in prices is Winter Storm Elliott, which sent around 1.5 million bpd of refinery capacity in the U.S. Gulf Coast offline, per financial express. Plus, despite a rise in COVID cases, China announced an easing of its travel quarantine rules.
Platinum to Continue its Run
Platinum surged to its best quarter since 2008, per CNBC. China has imported excessive amounts of platinum since 2019, according to the World Platinum Investment Council, quoted on CNBC. The Council anticipates a platinum deficit in 2023, with demand growing by 19% but supply increasing by just 2%. Graniteshares Platinum Shares ETF (PLTM - Free Report) is expected to continue its winning stretch.
Agricultural Commodities to Win?
Though many commodities may see sluggish demand in 2023, agricultural commodities are likely to be an exception. Prices of grains have lowered from their recent highs but their direction in the coming months depends on the events in the Black Sea region, in particular any further extensions of the agreement that allows Ukrainian wheat exports to transit via Black Sea shipping corridors despite the Russian blockade of Ukrainian ports.
The Russia-Ukraine war will also have an indirect impact on coffee, cocoa and tea prices through high fertilizer prices and resulting shortages, per eiu.com. iPatha.B Grains Subindex TR ETN and MLCX Grains Index TR ETN Elements should thus be under watch. Both ETFs gained mildly in December.