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iShares Switzerland Capped ETF (EWL) & VanEck Vectors Steel Index ETF (SLX.I)

The recent rebound in equity markets continues to gain traction, particularly in Europe, where several major markets have broken out to the upside this month. In North America, major indices remain on the rebound but have not been able to break through highs reached earlier this year. In terms of sectors, Technology/Communications remain relatively strong, with Energy and Materials starting to pick up as well. Financials are mixed at the moment with Insurance starting to bounce back, but the other areas continuing to struggle.

The recovery in Bitcoin continues to accelerate with it retaking $30,000 this week. Gold continues to trade above $2,000/oz while emerging markets and US small caps like the Russell 2000 Index continue to struggle. This suggests that demand for alternative currencies remains high while the appetite for more aggressive positioning in equities remains soft.

The biggest news of the week has been the US Consumer Price Index dropping to 5.0% in March for the first time since May of 2021, from 6.0% the previous month. Meanwhile, the Bank of Canada suggested that inflation could drop toward 3.0% by mid year from near 5.0% currently, but that it could take to the end of 2024 to get back closer to its 2.0% target.

This significant easing in inflation pressures also means that after a year of monetary tightening, Fed Funds (which started at zero in early 2022) and CPI (which peaked at 9.1% in June of 2022) have finally essentially met in the middle. With this, the path to a pause tor the Fed at any time, has become clearer with the probability growing that the US central bank may only have one maybe two hikes left in the current program. The Bank of Canada and the Bank of Korea both kept interest rates on hold this week, giving the Fed scope to pause at any time as well.

Corporate confession season has been very quiet so far, setting the stage for US earnings season with starts Friday with big banks and other big caps reporting results including Citigroup, JP Morgan Chase, Wells Fargo, UnitedHealth, Blackrock and others. Earnings season ramps up over the coming week with results on the way from senior companies across several sectors including banks, brokerages, credit card lenders, personal products producers, airlines, railroads, homebuilders, miners, steelmakers and others. Headliners include: Netflix and Goldman Sachs on Tuesday, Tesla Motors and IBM on Wednesday and Union Pacific, and American Express on Thursday.

In this week’s issue of Equity Leaders Weekly, we look at recent index action in Europe and preview earnings season through a loot at the Steel sector.

iShares Switzerland Capped ETF (EWL)

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