Stock markets sustain year-end rally with low liquidity

The last week of the year reveals ups and downs, with stock markets sustaining a year-end rally while liquidity remains low. We will explore the optimism driven by record highs on Wall Street, the US interest rate outlook for 2024 and the opportunities and challenges in assets such as Gold and the Euro/USD pair.

Last week, the New York Stock Exchange accumulated its 8th consecutive week of increase. Despite the sideways closure before Christmas, the week started with new records being set! Novembers PCE, weaker than expected, strengthened the prospect of lower interest rates in 2024.

American economic data released in the penultimate week of 2023 helped consolidate bets on the Fed cutting interest rates at the beginning of next year. The Q3 2023 GDP indicated that the US is heading towards a “soft landing”, and the November PCE confirmed the declining inflation trajectory. Although some members of the American Central Bank still show caution (which is, without a doubt, their role), the market already considers monetary easing to be certain, with only the date left to be confirmed – the FOMC meeting in March or May 2024, with greater probability at first.

This is the apex of the economic cycle. This moment of inversion has everything to make 2024 the best year of the next decade for stock markets. Brazil is very well positioned, being one of the highlights among emerging markets, while others are involved in conflicts, making Brazil one of the best investment options. In this scenario, we also have a strong projection for IPOs next year.

A projection by Bank of America, cited by Estadão, estimates that funding on the Brazilian stock exchange over the next 18 months could reach US$100 billion to US$120 billion in a benign “perfect storm” scenario, with interest rate cuts in the US.

For this week

Liquidity is extremely low in this last business week of the year. We will not have relevant data capable of changing any expectations. We recommend caution due to low liquidity; rapid movements can occur and disrupt short-term operations.

Gold Analysis

The XAUUSD Gold contract maintains a robust upward trend, in line with the devaluation of the US dollar. We are close to significant resistance, the high of U$2,075.00, which was reached previously. Despite having been broken, it is important to note that it left a considerable fuse, which will be disregarded here. This week, due to low liquidity, the most recommended option is to stay on the sidelines. However, for those who decide to trade, we suggest paying attention to this notable resistance, making it logical to speculate a sale with a short stop above it.

XAUUSD, 1D (TradingView)

Euro/USD Analysis

The EURUSD pair continues its strong upward trajectory, starting the week at new heights. When plotting a Fibonacci expansion, we can project a first target around U$1.11 and a second target above at U$1,115. However, it is important to remember that this is not an ideal week to trade, although volatility is high. Always keep a well-placed stop when considering any move.