BUZZ Investing: Stock Markets Rally as Fed Signals End to Rate Hikes

Domestic stock markets experienced a significant rally during the recent period between Index selection dates (November 9, 2023, to December 21, 2023, the “Period”), largely driven by the Federal Open Market Committee's (FOMC) continued stance to maintain steady interest rates as reinforced during their recent meeting on December 13th. During his press conference, Fed Chair Jerome Powell all but declared ‘mission accomplished’ on the battle against inflation, noting “real progress in core inflation” as the economy averted a recession during the recent rate hike cycle. Market participants are increasingly factoring in the likelihood that the current series of rate hikes have concluded, with the Fed ‘dot plot’ of forward policy rate projections reinforcing that view and forecasting 75 bps of interest rate cuts in 2024.

During the Period, the BUZZ NextGen AI US Sentiment Leaders Index (the “BUZZ Index”) surged 20.7%, the S&P 500 index rallied 8.8%, and the technology-focused Nasdaq Composite Index gained 9.3%. A notable shift in market dynamics occurred during the Period, with risk assets, like stocks, showing a positive correlation with US Treasury bonds. This trend contrasts with the previous 'risk-on' attitude, where safe-haven assets like government bonds and the US dollar typically moved inversely to equities and other risk-oriented investments. Additionally, key indicators of market risk decreased substantially during the Period. Both the Markit CDX North America High Yield Index, a measure of credit risk, and the Chicago Board Options Exchange Volatility Index (VIX) dropped toward their lowest levels of the year.

A New 'Risk-on' Paradigm

(December Selection Period Returns)

Source: Bloomberg/Periscope Capital.

The BUZZ Index returned 16.35% during the month of November compared to a return of 9.13% for the S&P 500 Index during the same period. Year-to-date, the BUZZ Index leads the S&P 500 with returns of 38.65% and 20.80%, respectively, as of the end of November.

Shares of Coinbase Global Pace Advancing Stocks within the BUZZ Index

Ninety-percent of BUZZ Index constituents exhibited gains during the recent Period with shares of Coinbase Global Inc (NASDAQ: COIN) pacing advancing stocks within the BUZZ Index for the second Period in a row. COIN surged 65.4% during the Period to its highest level in nearly two years. COIN’s surging stock reflects continued optimism in the cryptocurrency market. Bitcoin's value has soared above $42,000, a peak not seen since April 2022, driven by a surge in market optimism. This upswing is primarily attributed to expectations of impending interest rate reductions in the United States and growing anticipation that the U.S. will soon greenlight the launch of Bitcoin-focused exchange-traded funds, sparking increased trader activity and bullish sentiment in the cryptocurrency market. Moreover, Coinbase Global, Inc. has gained traction as a prominent player in the cryptocurrency space, particularly following the downfall of FTX and the challenges faced by Binance, its main competitor.

Source: BUZZ Holdings ULC, Bloomberg. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. Not intended as a recommendation to buy or to sell any of the securities mentioned herein.

Just seven stocks within BUZZ Index constituents posted negative returns during the recent Period. Pfizer Inc's (NYSE: PFE) stock significantly underperformed during the recent Period, dropping 12% to reach its lowest point in over a decade. The pharmaceutical giant has seen its valuation plunge by $140 billion, a 50% decrease from its peak during the COVID-19 pandemic in 2021. This downturn is largely due to an overestimation of demand for its pandemic-related products, a quicker than anticipated decline in sales post-pandemic, and its other products' inability to bridge the revenue gap. In response to these challenges, Pfizer has initiated layoffs and other cost-cutting strategies, while simultaneously shifting its focus towards the development of new products and strategic acquisitions to navigate the competitive landscape and mitigate revenue losses.

Source: BUZZ Holdings ULC, Bloomberg. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. Not intended as a recommendation to buy or to sell any of the securities mentioned herein.

Sentiment Stock Highlight – Robinhood Markets

Robinhood (NASDAQ: HOOD) has consistently been one of the most discussed stocks online, with much of its popularity coming from the meme stock mania of 2021. As one of the first brokers to market zero-commission trading to its customers, HOOD is a popular online brokerage platform among younger demographics, with the company's foray into crypto trading further increasing its appeal. The past two years have been difficult for the stock, with rising interest rates ending the bull market and suppressing crypto prices. The last month has seen the tide change, as the expectation that the rate hike cycle has peaked has driven both stock and crypto prices higher. The price of Bitcoin has broken above $42,000 USD once again, with many crypto tokens gaining upside momentum. The effects have flowed through to HOOD, fueled by a report that cited a 75% increase in cryptocurrency trading and a notable $1.4 billion net deposits, indicating heightened customer engagement and activity. This month, sentiment on HOOD jumped, pushing its weight in the BUZZ Index to a maximum of 3%.

Robinhood Markets Stock Price | January 2023 – December 2023

Source: BUZZ Holdings ULC, Bloomberg. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. Not intended as a recommendation to buy or to sell any of the securities mentioned herein.

BUZZ Index December 2023 Rebalance Highlights

Walt Disney Co.

Despite Bob Iger's return as CEO of Walt Disney Co (NYSE: DIS) in November 2022, the company continues to face significant challenges. Iger, who initially retired in early 2020, came back following a series of operational missteps and the profound impact of the pandemic, which led to massive layoffs and the closure of theme parks. This period also saw a strategic shift towards the Disney+ streaming service. However, the company's ongoing struggles have prompted its largest shareholder, activist investor Nelson Peltz, to initiate a proxy battle for three board seats. DIS shares have experienced a downturn, briefly reaching pandemic lows in October, and falling 60% from their peak. Despite these challenges, investor sentiment remains guardedly positive. Value-focused investors appear to increasingly recognize the potential upside in shares of DIS, considering the company's longstanding brand appeal as a strong foundation for future growth. This month, DIS climbed to a maximum 3% weight in the BUZZ Index.