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 Russell 2000 Index (RLS.I) & CBOE 10-Year Interest Rate Continuous Contract (TNX.I) 

It has been a tumultuous week for equity markets with several large intraday swings indicating a volatile environment. The prospect of interest rate increases in both the US and Canada, with both the Fed and the Bank of Canada hinting that they could start raising rates at their next meetings in March, sent investors fleeing from risk markets into defensive havens.

In this environment, capital continued to rotate out of technology/momentum stocks, and cryptocurrencies with several markets staging significant breakdowns including the S&P 500, the Russell 2000, and Bitcoin. On the other hand, capital moved back into gold, the Japanese Yen and defensive US Dollar assets.

Earnings season continues and while results and the market reaction to them have generally been better than last weeks disappointments and selected massive plunges in stocks like Netflix and Peloton, overall, investor sentiment remains skittish with investors nervous about when or where the next shoe could drop.

The coming week brings us through the peak of earnings season for large cap US stocks tonight with the focus on Big Tech, Big Oil and Big Pharma. Headliners include Apple and Visa tonight, Chevron and Caterpillar tomorrow, Exxon on Tuesday and Alphabet and Meta (Google and Facebook) next Wednesday. Big Oil earnings in Canada (Imperial and Suncor) start later next week.

The coming week also brings the turn of the month and a number of economic reports, with investors likely to continue weighing indicators on the health of the economy versus indicators highlighting inflation pressures. Today for example, the decision was split between stronger than expected US Q4 GDP (6.9% vs street 5.5%), and higher than expected US Q4 GDP price inflation (7.0% vs street 6.0%).

In this issue of Equity Leaders Weekly, we take a look at the implications of a breakdown by the Russell 2000, and at the recent rise in US traded interest rates.

Russell 2000 Index (RLS.I)

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