The Signal: Bidin' Time

The Market

It’s time to take stock of one of the more eventful first quarters in recent memory. But only for a brief moment, as Friday brings what will likely be a volatile market session. 

The quarter ended on a sour note for bullish investors Thursday. The biggest reason? Russia backtracked Wednesday on the state of peace talks. The pessimism halted Apple stock’s recent streak of gains (11 days in a row), along with Bitcoin’s 8-day streak. The cryptocurrency’s pause snapped a 25% gain which began March 6, and which outpaced the S&P 500’s rise of 10% in that same span. Defensive stocks, like utilities, were the biggest beneficiaries this week, a sign that investors are seeking safety in times of uncertainty. They are known as defensive as they are less prone to economic swings and often pay stable dividends. 

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A Quarter for Your Thoughts

As for the quarter, it comes as no surprise to our frequent readers that the energy sector led the way, up 30%. This, despite the Biden Administration’s attempt Thursday to cool energy prices by releasing portions of its oil stockpile into the economy. Technology stocks, which tend to be more volatile and growth oriented, lagged. This was due to a combination of higher interest rate expectations, which make their returns less attractive. Of the tech stocks that did gain, solar and cybersecurity stocks dominated the list. This was in part due to calls for alternative energy to fossil fuels and warnings to protect against potential Russian cyber attacks.

With such dramatic moves in equities (the worst quarter for stocks in 2 years), some investors may find it prudent to rebalance their portfolios toward weightings that may properly reflect their outlook. 

Learn about how to rebalance a portfolio

Volatility Ahoy?

Friday starts a new quarter, and it should thrill. The monthly jobs report and a slew of electric vehicle (EV) delivery data from retail investor favorites like Tesla and Nio are expected.  

The jobs report is a key focal point for economists and central banks. It has the potential to change the conversation around how fast interest rates will rise and whether economic growth forecasts should be amended. It is due at 8:30am ET.

Tesla and Nio will be closely watched for any supply chain disruptions or waning demand. Coincidentally, the Biden Administration Thursday invoked the Defense Production Act to ensure stable supplies of key battery production materials for EVs. This could be seen as a sign there are medium-term worries that U.S. companies might struggle to acquire materials sourced from the Russia/China region. It also comes as Tesla made strides to diversify its manufacturing, notably with its Gigafactory in Berlin that opened last week.

The Data

Was it the War or Politics?

We’ve focused on geopolitics, and for good reason. But there are lots of reasons cryptocurrencies have recovered over the past month, Andrew Pesco, Head of Investment Management said, but of note was the Biden Administration action on crypto, he added. 

“One of the most regulatorily exposed parts of crypto is DeFi and since the executive order was signed, DeFi assets are up 36% -  the order marking the bottom of the decline over the last year.” Pesco also points to Ethereum’s rally, up 33% over the same time span, and a key point in that optimism was “regulatory clarity.” That gain outpaced other risk assets during the period, such as ETFs that track tech names like XLC and XLK, which rose 7% and 10% respectively. 

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