Investment Weekly Diary 22-OCT-2023 The Worst Week of 2023

 Investment Weekly Diary 22-OCT-2023 The Worst Week of 2023 

Folks, strap in because we just witnessed one of the rockiest weeks in recent memory. Between geopolitical tensions flaring up and ominous signs from the Fed, investors got spooked big time. Let's break it down...

The Israel-Hamas conflict exploded again with airstrikes and rockets lighting up the skies. The death toll surpassed 200, including far too many innocent civilians. Meanwhile thousands of Palestinians with dual citizenship booked it to the Gaza-Egypt border, desperate to escape the violence. Dark times.  

On the finance front, the Fed dropped some seriously concerning warnings about how all these global conflicts could wreak havoc on the financial system. Fed Chair Powell pumped the brakes on interest rate hikes for now. But he left the door wide open to resume increases if inflation persists. And those surging Treasury yields aren't helping matters. More uncertainty. Fantastic.

Across the pond, UK borrowing was lower than expected, putting heat on the Chancellor to reveal potential tax cuts already. And crypto darling FTX scored a mega $32 billion valuation after securing $400 mil in funding.

Now to the bloodbath on Wall Street. Stocks logged their worst week in recent memory as recession fears battled hopes for an economic revival. The Fed's alarming commentary didn't help. 

The Nasdaq plunged 3.16%, extending its losing streak to three straight weeks. The S&P and Dow also racked up sizable losses, erasing gains from the prior week. 

Big Tech names like Amazon and Apple weren't spared from the carnage, each dropping 3%+ for the week. Meta and Alphabet also took hits. Only Netflix managed to swim against the tide with a 12.7% pop on its earnings win.  

Buckle up folks. The unrelenting rise in Treasury yields spells trouble on the borrowing front. And Powell's speech highlighted uncertainties old and new that could derail the Fed's fight against inflation. But he reiterated the need to "proceed with caution" on rate hikes given the risks. The bond market seems to think the Fed may pause increases at their next meeting. We'll see.

On the bright side, the low unemployment rate offers a glimmer of hope. And retail sales rebounded in September, signaling consumers are still spending despite everything.

The bottom line? Don't expect the volatility to vanish yet. But the economy may still power through if consumers keep stepping up. We're not out of the woods, but cautious optimism could pay off. Just be selective on stocks and hedge your bets.

Now over to the China/HK side of things...where market swings gave investors whiplash. Stocks plunged as the conflict halfway across the world caused a rush to safe haven assets. Ouch.  

Both markets dropped to lows not seen since last November. Shanghai stock even cracked the critical 3,000 point level. Yikes.

Morgan Stanley warned that the foreign investor exodus from Chinese shares was unprecedented. They cautioned against trying to time the bottom. The money flowing out was concentrated in big growth and tech names like Tencent, Alibaba, JD.com and more. 

After years of loose money, now the Fed is tightening the taps. And China can't just turn on the liquidity without risking RMB devaluation and accelerating capital flight. 

Morgan Stanley data revealed foreign managers yanked another $11.7 billion from Chinese stocks in the first 19 days of October, on top of September's $25.6 billion bloodletting.

They don't see a turnaround for China shares until mainland economic fundamentals improve significantly. That would shore up corporate performance and restore investor trust. Easing up on infrastructure spending could help too.

But until then, get ready for more back-and-forth. And with rates still high, don't expect a sentiment shift before 2023's close. Patience will be key.

Geopolitical tensions have also accelerated the manufacturing shift out of China into ASEAN for apparel. Nike and Adidas already cut back their China production by up to 7% from 2017 to 2022. Expect that trend to persist.

So in summary - last week was a wild ride. And China/HK stocks still face serious headwinds. But the markets can turn on a dime when fundamentals improve. Stay nimble out there folks. Keep perspective through the noise. And remember – uncertainty breeds opportunity for the prepared mind.

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