Red Sea; Troubled Waters

U.S. Equities were mostly flat, last week, as tensions in the Middle East and the launch of several spot Bitcoin ETFs dominated headlines.  As “bad news” was often “good news” last year, good news was bad news for Bitcoin, with the cryptocurrency down 5.3% after the new ETFs were approved and started trading. One hurdle for the new funds will be getting listed on brokerage platforms.  Several leading brokers indicated it could take several months for internal reviews to be completed.

Weekly Performance

Data Source: Factset® Performance Period: 1/8/2024 1/12/2024

As earnings season starts to ramp up, we saw several large banks reporting last week. JPM came in above expectations, while WFC, BAC, and C all missed. In the weeks ahead, we expect the spotlight to be on BA (Boeing) following the unplanned midflight departure of a door plug from an Alaskan airlines 737 Max 9. The focus will likely be on untightened or missing bolts on the door plug, which raises further concerns over BA’s ability to implement quality control. This comes after spinning out Spirit AeroSystems and a similar issue with incorrectly drilled holes in the fuselage.

In economic news, consumer credit (SA M/M) saw a hot print last week, with $23.8B in non-real estate lending extended to consumers in November vs the expected $9B! That could certainly be a sign of many overindulging their holiday spending…future reports will tell. Headline CPI (SA M/M) for December came in above expectations at 0.3%, while Core CPI (SA M/M) came in at expectations of 0.3%. Hourly Earnings (SA M/M) saw a 0.4% rise in December, while initial and continuing jobless claims came in below expectations. Friday finished the week with PPI (SA M/M) coming in sharply below expectations at -0.3%. Overall, the data last week was mixed, but continued the dis-inflation narrative, as employment holds and Fed policy does its work.

In geopolitical news, last week saw the Israel-Hamas war reach the 100-day mark, as Gaza experienced a 72-hour communication blackout, and Houthi Rebels vowed to continue attacks on ships in the Red Sea on the heels of the United States and United Kingdom conducting a joint strike on Houthi military hardware used for attacks on vessels. In the Russo-Ukrainian war, Ukraine alleges to have shot down significant Russian aircraft with an A-50 spy plane and IL-22 command post. These strikes should make targeting assets inside of Ukraine more difficult for Russia.

As we head into earnings season, we expect to hear more from companies on their outlook for the year ahead and get clarity on holiday sales from last year. That news could go either way. Unfortunately, as terrorism threatens more and more people around the world, that news is never good. Wars and rumors of wars won’t cease during this age, but we pray for Christ’s words to reach the ears of more in the Middle East: “You have heard that it was said, ‘Love your neighbor and hate your enemy.’ But I tell you: Love your enemies and pray for those who persecute you, that you may be sons of your Father in heaven” (Matthew 5:43-45).

Sources: Yahoo Finance, Reuters.com, and JP Morgan Market Insights. Securities offered through American Portfolios Financial Services, Inc. of Holbrook, New York, 631.439.4600,(APFS), member FINRA, SIPC.  Faithward Advisors is not owned or operated by APFS. Faithward Advisors offers Investment Advisory services through Ambassador Advisors, an SEC Registered Investment Advisor. Dream More, Plan More, Do More is a registered trademark of Faithward Advisors, LLC, Reg. U.S. Pat. & Tm. Off. Any opinions expressed in this forum are not the opinion or view of Faithward Advisors or American Portfolios Financial Services, Inc. (APFS). They have not been reviewed by either firm for completeness or accuracy. These opinions are subject to change at any time without notice. Any comments or postings are provided for informational purposes only and do not constitute an offer or a recommendation to buy or sell securities or other financial instruments. Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.