Weekly review - S&P 500 and Dow Jones hit new highs

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22.01.2024

Key topics of the week:

1. S&P 500 and Dow Jones reached new highs

2. Top idea for 2024.

3. Kaspi.kz entered NASDAQ

The S&P 500 and Dow Jones reached new highs. Major US stock indices rose over the week, and Friday's rally pushed markets to new highs. The S&P 500 added 1.2% and updated its All Time High set on January 3, 2022. The Dow Jones index exceeded the record it set 17 days earlier. The market's latest gains marked the 11th positive week out of the last 12.

We believe that 2024 will usher in the next stage of the economic cycle. Inflation is expected to continue to decline amid a slowing economy. The Federal Reserve will begin to gradually move away from its high interest rate policy, which will be a catalyst for new economic growth.

Also, a significant factor is the current state of the balance sheets of central banks, which are still at record high levels and serve as “safety cushions” in times of crisis. So, despite negative money supply growth in many countries, there is still a lot of money in the system. We believe that this optimistic aspect is still not sufficiently appreciated by market participants, which helps support share prices.

Top idea for 2024. Sentiment towards US regional banks is improving. (Regional banks are banks that operate in only one or a few states in one geographic region of the United States)

For U.S. regional banks, 2023 was a turbulent year. The failures of Silicon Valley Bank, Signature Bank and First Republic Bank in March and April weighed on stock prices of regional banks. High rates increase the cost of deposits for banks because they have to pay more interest to depositors. This led to an acceleration in the upward revaluation of deposits. This revaluation of deposits had a negative impact on bank profits, causing depositors to worry about the safety of bank deposits and the extent of further revaluation of deposits in an environment of elevated interest rates.

In our opinion, stabilizing the cost of deposits is a very important factor for banks. We believe that following the most aggressive monetary policy tightening campaign in 40 years, the cycle of rate hikes is now complete, which will have a positive impact on banks' margins.

Kaspi.kz – entered NASDAQ. On January 19, trading in depository receipts of the Kazakh fintech kaspi.kz began on the NASDAQ exchange. Kaspi placed 11.3 million American depositary shares (ADS) at $92 per share. The organizers of the placement, according to Bloomberg, are Morgan Stanley, JPMorgan and Citigroup. Securities of fintech company Kaspi.kz rose in price by 4.32% by the end of the first day of trading after their initial public offering. The fintech group's share price increased by $3.97 from its initial IPO price of $92 per share.

It is also worth noting that Kaspi.kz's IPO became one of the largest in the American market since the listing of the German shoe manufacturer Birkenstock, which emphasizes the company's significant potential in the international arena.

Weekly schedule

Redistribution of bond portfolios in favor of bonds that are less sensitive to the Fed rate.

Wells Fargo Investment Institute is reallocating portfolios from long duration to intermediate-term, since intermediate-term bonds are less sensitive to rates. Wells Fargo Investment Institute expects an increase in the base rate and believes that a reduction in duration provides an opportunity to lock in profits.

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