Morning Wrap: ASX 200 futures flat, Deutsche Bank and BMO see S&P 500 at record highs in 2024

Major US benchmarks finished lower amid a relatively quiet post-Thanksgiving session, US bond yields fell across the board, market strategists from Deutsche Bank and BMO expect the S&P 500 to rise more than 10% in 2024, gold hits a six month high and we revisit previously extreme oversold indicators.

Let's dive in.

S&P 500 SESSION CHART

S&P 500 lower in relatively uneventful trade (Source: TradingView)

MARKETS

• S&P 500 traded in a tight range, finished lower and near worst levels

• Quiet session coming out of the Thanksgiving-shortened session

• US bond yields notably weaker across the curve, with the 10-year down 9 bps to a fresh 2-month low of 4.39%

• Market narrative remains relatively unchanged, driven by disinflation momentum, peak Fed, soft landing traction, elevated cash on the sidelines, seasonality tailwinds, falling oil prices and low volatility

• Deutsche Bank sees 12% upside to S&P 500 through 2024-end (Reuters)

• BMO sees solid US gains ahead, S&P 500 ending 2024 at 5,100 (Reuters)

• Investors sit on record $5.7tn in money market funds, which could be bullish tailwind for risk assets (WSJ)

• Gold hits six month high amid soft landing optimism (WSJ)

• OPEC+ members including Iraq and Russia resist Saudi Arabia’s call to reduce oil output quotas to shore up global markets (Bloomberg)

STOCKS

• iRobot shares plummet after EU regulator said Amazon's planned $1.7bn acquisition raises competition concerns (CNBC)

• Okta downgraded by JPMorgan after last months cybersecurity breach ‘significantly degraded’ the company’s brand (CNBC)

• Albemarle shares slide 6% as battery metal prices continue to plummet (Bloomberg)

CENTRAL BANKS

• Inflation gauges in the US and Eurozone at 2021 lows which may support end of Fed, ECB rate hikes (Bloomberg)

• BoE Governor Bailey warns of tough battle to bring down inflation (Bloomberg)

• Australia to bill giving RBA experts more responsibility for setting rates (Reuters)

• Bank of Korea likely to keep policy rate steady (Yonhap)

CHINA

• China's industrial profits growth slows, prompting calls for policy support (Reuters)

• Beijing Stock Exchange limiting sales by major shareholders (Reuters)

• China sees signs of ebbing pneumonia in children (Bloomberg)

ECONOMY

• Cyber Monday deals getting snapped up by price-sensitive US consumers (Reuters)

• Mastercard SpendingPulse says US retail sales on Black Friday up 2.5% year-on-year, eCommerce sales up 8.% year-on-year (Mastercard)

• US new home sales down 5.6% month-on-month on higher mortgage rates (Reuters)

• US gasoline prices down for 60-straight days to US$3.25 national average or 60 cents below recent peak (Bloomberg)

VIX Near 4-Year Lows: Bullish or Bearish

Complacency is traditionally a dangerous thing in financial markets. One way to determine whether participants are feeling complacent is to look at the Volatility Index – Sometimes called the VIX or the Fear Gauge.

That fear gauge is currently at the lowest levels in nearly four years – Driven by an expectation the US Federal Reserve is done raising interest rates and a resilient corporate earnings picture.

S&P 500 VIX Chart (Source: TradingView)

The Morning Wrap has talked about a lot of other indicators bouncing from extreme levels in late October, including:

• CNN's Fear & Greed Index – Which is nearing 'Extreme Greed'

Source: CNN

• Bank of America's Bull & Bear Indicator – Which has only just exited 'Extreme Bearish' levels as of last Friday, 24 November

Source: BofA Global Investment Strategy

• AAII Investor Sentiment Survey – In the first week of November, 24.3% of respondents were 'Bullish' vs. a historical average of 37.5%. It's now back up to 45.3%.

Source: AAII Investor Sentiment Survey

• Currency markets – The Australian Dollar is at a three-month high against the US Dollar and the US Dollar Index, a classic risk-aversion indicator, is hovering at lows not seen since August.

US Dollar Index chart (Source: TradingView)

Most indicators have returned to neutral or bullish levels. They're not at extreme levels yet, which might provide more fuel in the tank and coincides with the traditional end-of-year seasonality factors. But what happens when the Fear & Greed Index enters 'Extreme Greed' or the US Dollar Index hits extreme oversold levels?

Chart of the Day

We now have another euphemism for recession, everybody! Thanks to J.P. Morgan, it's now called... "boil the frog"? I realise this sounds ridiculous but all this chart shows is where the investment bank believes the US economy will land. And even if there is a recession (which has been slowly brewing for some time but is now only coming to the surface hence the boiled frog reference), there doesn't seem to be much consensus on what impact such a recession would have.

Analysts suggest there is a 25% chance the damage is done, 20% chance things will break further, and a 15% chance that things will remain too darn hot. I bet you won't ever look at frogs the same way again.

Source: JPMorgan

ASX corporate actions occurring today:

• Trading ex-div: Beacon Minerals (BCN) – $0.001 

• Dividends paid: Champion Iron (CIA) – $0.11, Embark Early Education (EVO) – $0.02, Silk Laser Australia (SLA) – $0.10

• Listing: None

Economic calendar (AEDT):

• 11:30 am: Australia Retail Sales (Oct)

• 6:00 pm: Germany Consumer Confidence (Dec)