DAILY UPDATE: Sovereign Wealth Funds, Mortgages and the Dimming U.S. Markets

By Staff Reporters



Sovereign wealth funds could be selling roughly $29 billion in equities by the end of December. Meanwhile, U.S. defined benefit pension plans would need to shift up to $70 billion from equities to bonds to hit their targets, reports Bloomberg quoting the JPMorgan estimates. “The recent equity market correction and bond rally are consistent with the rebalancing hypothesis,” Bloomberg quoted Vincent Deluard, a macro strategist at StoneX. 

DEFINITION: A sovereign wealth fund, sovereign investment fund, or social wealth fund is a state-owned investment fund that invests in real and financial assets such as stocks, bonds, real estate, precious metals, or in alternative investments such as private equity fund or hedge funds. Sovereign wealth funds invest globally.

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And, in a recent interview with CNN, Bank of America CEO Brian Moynihan said he’s concerned the housing market will continue to challenge buyers in the coming years. Moynihan pointed to sky-high mortgage rates as a big reason buyers might continue to struggle — especially first-time buyers with more limited financial resources. Moynihan also said there could be two more years of pain in the housing market before things cool off and homes become more available and affordable. And that’s a tough pill to swallow.

Finally, U.S. stocks were lower, adding to last week’s declines, as the global markets continued to grapple with the ultimate impact of aggressive monetary policy tightening around the world. Last week, the Fed, European Central Bank, Bank of England, and Swiss National Bank all increased their benchmark interest rates by 50 basis points, fostering recession concerns.

Treasury yields traded higher, and the U.S. dollar was unchanged, while crude oil gained ground, and gold was lower.

Other equity news was light, as L3Harris Technologies announced an agreement to acquire Aerojet Rocketdyne with an enterprise value of $4.7 billion, while shares of Madrigal Pharmaceuticals surged after positive trial results for its NASH and liver fibrosis treatment.

A busy week of housing data commenced, as the NAHB’s December Housing Market Index unexpectedly deteriorated.

Asia finished mostly lower as China’s COVID concerns weighed on sentiment, though European stocks were mostly higher, rebounding from last week’s decline as the global markets digest the recent rate hikes on both sides of the pond.


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