Euclid Investment Advisory Blog

Review & Analysis at Close January 31, 2022

Comments

The deeply oversold and January laggards, Large Cap Growth stocks and ETFs, came bursting back to life this past Friday and continued today. We hope this is more than end-of-month window dressing. Nevertheless, these reversals came despite concerns of inflation, supply issues, rising gasoline and food prices, interest rates, Russia - Ukraine tensions, etc.

One down-the-road concern is the increased flattening of the Yield Curve as the spread continues to narrow. Banks stocks have backed off despite rising interest rates. The Market may have fears that the Fed will raise rates aggressively into a slowing economy. We have had and continue to have an imbalance between supply and heated demand; in time supply will catch up to a potentially cooling demand.

Equities

After steep losses and volatility in recent sessions, all US equity indices advanced sharply last Friday and continued again today, including Small caps.

  • Equity Style Tech Score Ranking: While Large Cap Value stocks lead in a one-week ranking, Large Cap Growth reversed and plowed to leadership over the past two sessions.

  • Sector Tech Score Ranking: While Energy, Staples and Financials lead in one-week ranking, Consumer Discretionary, Technology and Communication Services lead over the past two sessions.

Bonds
The 30-year US Treasury yield Long Term trend and 10-year US Treasury yield Long Term trend remain up, but both retreated since recent peaks on January 19.

The 2-year Treasury yield rose to 1.18 today. The Yield Curve's rate of flattening increased sharply since last week. The spread narrowed to 0.61 from 0.76 last week.

 

Currencies
Currencies vs. US Dollar: The Australian Dollar, the Euro, the British Pound and the Yen bounced up today while remaining in long-term downtrends.

US Dollar vs. basket of major currencies: The Dollar pulled back today while the Long Term trend remains up.

Gold ETF "GLD" fell slightly and remains in its long-term trading zone of 164 to 173.

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