Week (September 1 - October 4) in Review: Financial Leaders
Interesting Facts and Market Dynamics
Between September 1 and October 4, 2023, global financial markets experienced a blend of notable surges and setbacks, driven by a mix of economic reports, geopolitical events, and investor sentiment. Interestingly, the energy sector emerged as a key driver of growth, with oil-related ETFs witnessing sharp gains. United States Oil (USO) surged by 8.97%, buoyed by supply concerns and strong global demand. The USDJPY currency pair also posted a notable increase of 2.50%, reflecting a strengthening U.S. dollar against the Japanese yen as investors seek safer assets amid global uncertainties.
Meanwhile, cryptocurrencies experienced a tough month. Ethereum (ETH.X), XRP (XRP.X), and Monero (XMR.X) all posted double-digit losses, plummeting by 11.07%, 11.65%, and 12.05% respectively. This decline signified a shift in investor confidence in the digital asset market, potentially triggered by regulatory challenges and macroeconomic factors.
Global Overview
The global financial landscape saw mixed performances across various asset classes. While the energy sector soared, driven by rising oil prices and supply constraints, other areas, such as small-cap materials, faced pressure. The Invesco S&P SmallCap Materials ETF (PSCM) fell by 2.82%, highlighting the challenges in materials due to rising input costs and slowing demand.
The U.S. market also saw volatility, with the S&P 500 (SPY) and Dow Jones Industrial Average (DIA) posting modest gains of 0.56%, while the NASDAQ-100 (QQQ) led with a 0.89% rise, driven by strong tech sector performance. However, the Russell 2000 (IWM) declined by 0.55%, as small-cap stocks struggled compared to their large-cap counterparts. Market volatility painted a varied picture; the S&P 500's VIX dropped 1.52%, indicating reduced uncertainty, while the Dow's VXD spiked by 5.01%, reflecting heightened concerns over blue-chip stocks.
Sector Overview
The energy sector shone brightly in the last month. The Energy Select Sector SPDR ETF (XLE) gained 6.55%, and the VanEck Oil Services ETF (OIH) followed closely with a 6.43% increase, as oil prices surged due to tightening supplies. Industrials also showed strength, with the KraneShares Electric Vehicle ETF (KARS) advancing by 5.51%, driven by increased interest in electric mobility and related technologies.
In contrast, the technology and financial sectors faced headwinds. The ARK Innovation ETF (ARKK) dropped 3.86%, reflecting losses in tech innovation stocks. In Europe, the iShares MSCI Europe Financials ETF (EUFN) fell 3.09%, signaling concerns about European financial stability amid rising interest rates and economic slowdowns.
International Overview
International markets displayed a stark contrast between regions. Latin America, specifically Mexico, fared well, with the iShares MSCI Mexico ETF (EWW) up 3.21%, reflecting strong economic performance and resilient consumer demand. In Asia, the iShares MSCI All Country Asia ex Japan ETF (AAXJ) posted a modest gain of 1.20%, buoyed by a rebound in Chinese stocks.
However, there were sharp declines in other parts of Asia and Europe. The iShares MSCI South Korea ETF (EWY) plunged by 5.74%, and the iShares MSCI India ETF (INDA) fell by 3.52%, as both markets faced slowing economic growth and global supply chain disruptions. Europe’s iShares MSCI Eurozone ETF (EZU) dropped by 3.52%, highlighting concerns about inflation, energy costs, and slowing industrial production.
Market Volatility for QQQ, SPY, DIA, and IWM
Market volatility offered a complex landscape. While the S&P 500's volatility index (VIX) decreased by 1.52%, signaling reduced uncertainty for large-cap stocks, the Dow's volatility index (VXD) surged by 5.01%, showing growing concerns over blue-chip stability. The NASDAQ-100’s volatility index (VXN) declined slightly by 0.41%, indicating lower risk perception in the tech-heavy index. However, the small-cap-focused Russell 2000's volatility index (RVX) saw an uptick of 1.35%, underlining the persistent challenges for small-cap stocks.
Summary
Overall, the period between September 1 and October 4 was marked by a volatile but dynamic financial environment. The energy sector stood out as a top performer, with rising oil prices providing significant gains, while cryptocurrencies and tech stocks faced notable declines. U.S. large-cap stocks continued to outperform small-cap equities, supported by reduced volatility. International markets saw mixed results, with Latin America outperforming, while European and Asian stocks lagged behind, pressured by economic uncertainties and supply chain concerns.
The increased volatility in blue-chip stocks and small-cap equities will likely continue to shape market sentiment in the coming weeks, as investors react to global economic data, central bank policies, and geopolitical developments.