Job market shows signs of slowing: Will rate cuts begin earlier?

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Jessica Amir joined discussion · Nov 6, 2023 14:42

Week Ahead: November kicks off with a bang, more gains are in store

The major indices have seen their best week of 2023 and more gains are in store from a fundamental and technical analysis perspective. We cover the stocks and ETFs to watch that could see the most upside. Plus get ready for severe weather, heatwaves, bushfires, severe thunderstorms and flooding with a list of ETFs to keep on your radar. And you need to watch Block's shares as it's poised for a rally.

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What's happening in markets: the major indices see best week of 2023, more gains in store

Equities are being supported higher with a favorable narrative in play

-There are a myriad of factors supporting equity markets now;

- There are higher hopes the Fed can stop its hiking campaign and move to cutting rates in June, as US employment is showing fatiguing signs with jobs rising less than expected and the unemployment rate is ticking up.

- US S&P500 quarterly earnings are the strongest in a year and better than expected.

- Floods of investors are entering the market and bullish momentum is kicking in after the S&P500 was in oversold and correction territory.

- And investors are positioning for the market indices to move higher amid seasonality; with not only the last quarter of the year being historically the best for equities, but December has been the best month in history for the S&P500 with the index rising 2.1% amid the 'December effect'. The reason the Santa rally has historically occurred is not only because a lot of companies are doing share buy backs, but also because consumer discretionary companies see large rises in sales following Black Friday sales, to pre-Christmas shopping.

-Investments to watch amid the bullish narrative shift?

- watch the world's largest ETF's that track the S&P500, the SPX, the SPY $SPDR S&P 500 ETF (SPY.US)$, and IVV $iShares Core S&P 500 ETF (IVV.US)$.

- watch sectors that bode well in interest rates cutting cycles, such real estate, REITs and builders. Watch ETFs such as Real estate Select SPDR ETF ( $Real Estate Select Sector Spdr Fund (The) (XLRE.US)$) , and iShares USD Real Estate ETF ( $iShares US Real Estate ETF (IYR.US)$).

Get ready for severe weather, heatwaves, bushfires, severe thunderstorms and flooding with ETFs to watch

- Cast your mind back to the middle of year, during the northern hemisphere summer. Remember the world recorded its hottest day on record? Well now record temps are on notice again, this time in Australia.

- The BOM warned of severe weather for Australia's peak season, from bushfires to heatwaves, severe thunderstorms, flooding and tropical cyclones. And El Nino could impact 70% of crop output. This means you will likely see higher commodity prices, prices in your shopping trolly, higher energy demands, and higher insurance premiums as well.

- The BOM says there are greater fire risks this year, from high grass growth that was fueled by above average rainfall over the past 2 to 3 years.

- Investments to watch? Watch ETFs such as Betashares' FOOD $BetaShares Glb Agltr Coms ETF-Ccy Hdg (FOOD.AU)$ and iShares MSCI Agricultural Producers ETF ( $Ishares Msci Agriculture Producers Fund (VEGI.US)$), that both track the world's largest agricultural producers and companies. Also watch Invesco's Food and Beverage ETF $Invesco Food & Beverage ETF (PBJ.US)$). It's worth noting all of these ETFs have started to trend higher as they've been in oversold, correct territory, so fund managers have been buying the dip. Furthermore, the ETFs are seeing pent up demand due to seasonality (the December effect), plus as investment managers seek to benefit from any agricultural prices lift from El Nino.

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Trading and investing ideas from inflationary trends

Observational lesson and why you need to watch Block's shares

This morning I paid $7.60 for a large coffee. Let's call it a 'inflation overpowering disinflation cappuccino'. So what's behind the crazy price for a cup of takeaway coffee?

- Coffee bean prices have fallen 18%

- Average milk prices have fallen 10-23%

- Oil prices (think transport) have fallen 1.4%

- The Australian wage cost index is up 39%.

- Australian rents are up 390% annually - all in two years.

The payment terminal used in the café is Square, which was developed by Block. Square, trades on the NYSE under the code SQ $Block (SQ.US)$. Block also trades on the ASX under SQ2 $Block Inc (SQ2.AU)$. Over the last two years, its share price has fallen 79%. Also note, (stay with me here) that Square makes 40% of its money from Bitcoin - and the Bitcoin price has fallen by 44% in two years.

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The takeaways here?

1 - inflation is not going away in a lot of aspects of our lives.

2 - Also consider companies like Block (Square), still make money, regardless of inflation. In fact, they make more money as prices go up as they charge a percent of transactions and transfers in some cases. Plus with the US central bank, The Fed expected to cut rates now in June next year, this will further bolster tech companies profits. All in all, Block's gross profit growth and earnings (EBITDA) growth are expected to steadily grow from this year. That should result in Block's shares starting to lift and move toward a recovery.

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Block has solid financials

Block had a positive third quarter earnings report showing higher net revenue growth, higher earnings per share, earnings (EBITDA) and higher transaction-based revenue. Block also upgraded its guidance, and expects long-term growth ahead. Block (SQ, SQ2) last traded at $48.68 and the consensus price target is $72.79 with 71% of street analysts holding the stock as a buy.

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Block's price chart suggests its shares could rally

From a technical analysis perspective, if you were a chartist, you would have also observed that Square has a strong technical set-up that identifies its shares could see a strong rally. Its chart shows a bullish divergence, new positive momentum, and potential for a longer-term strong move higher based on the MACD, and simple moving averages.

Invest in your financial future.

From the team at moomoo

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The information is general in nature and has been prepared without considering your financial objectives, situation or needs. Consider the appropriateness of this information in light of your personal circumstances before making investment decisions.

Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only. Read more

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Jessica Amir

Moomoo Official Market Strategist

moomoo, market strategist. Seen/heard on Fox News Business, ABC, SBS, Reuters wires. Investor/Trader. Connect with me.

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