Positive sentiment drives stocks in January, especially in European markets such as Euro Stoxx, CAC 40 and DAX which are so far over 9% YTD. Investor expectations are also encouraged by cooling inflation data as well as rebounding bank stocks who experienced worrisome outlooks previously. Results of major US Banks pushed the S&P above its 200-day moving average, just above 4,000; while Nasdaq rallied for a sixth straight day to contribute to its biggest winning streak since November 2021.
Following the positive inflation data experts are discussing the idea of a 25bp increase at the FED’s next meeting on the 1st of February and eventually a pause in increases for future meetings.
“US short-term inflation views fell in early January to the lowest in nearly two years, providing a bigger-than-expected boost to consumer sentiment. Pricing pressures are weakening across many sectors, paving the way for the Federal Reserve to downshift its pace of hikes to 25 basis points at its next gathering. We shouldn’t be surprised if the Fed starts talking about pausing in the near future.”, CIO of Goldman Sachs stated. Other GS strategists added that “Because of its strength, interest-rate risk remains higher than the market is pricing. S&P 500 earnings revisions are pointing to “a hard landing”, even though the market is pricing in a soft landing. If there is no recession, as the team expects, S&P 500 earnings per share growth will be flat this year”.
In response to Thursday’s news showing a further slowdown in prices, Fed Bank of Atlanta President Raphael Bostic said CBS News, he is leaning toward backing a lesser rate hike at the next meeting. Traders will gain insight into how the aggressive Fed program to control inflation has affected profit margins during the coming weeks.
Most experts remain more cautious; CIO of CIBC Private Wealth said that “It’s a back-and-forth market. I don’t really buy the intense gloom that some people have that it’s going to get much worse, or the other extreme that we’ve already started a new bull market. I don’t think we’re there yet either”. Jack McIntyre, portfolio manager at Brandywine Global said “We have been in the inflationary bus, which is a fancy way of saying stagflation, and that’s not a great environment for financial assets. Equities don’t like the slowing economic activity and bonds don’t like the inflation part of it. So, we should get resolution this year on how do we break out of that stagflationary environment.”
Others see a more positive environment in the second half of 2023. US stocks could experience another decline before recovering in the second half of the year after the economy stabilizes, predict strategists at Bank of America Corporation lead by Michael Hartnett. Despite positive news in recent weeks, according to former Treasury Secretary Lawrence Summers, the US economy is still in a recession this year.
Although the economy is still healthy, Jamie Dimon, the CEO of JPMorgan, stated that we still do not know the eventual consequence of the headwinds approaching.
Disclaimer: Important Disclosures and Disclaimers. This report is intended for informative purposes only. Under no circumstances is it to be used or considered as an offer to sell or a solicitation of any offer to buy any security. It is recommended that investors independently evaluate the strategies and consult a financial adviser before proceeding to the purchase or sale of any security or other financial instrument. Also note that past performance may not be a reliable indicator of future returns. Investors may not get back the original amount invested. This report has been compiled based on information that I believe is reliable, but the accuracy, completeness, or correctness cannot be guaranteed. The opinions contained within the report are based upon publicly available information at the time of publication and are subject to change without notice.
The use of forward looking wording such as “expect”, “estimate”, “forecast”, involve known and unknown risks and uncertainties which may mean that the actual results may differ from any future results implied by the forward looking wording included in the relevant statement
There is a high level of risk involved with trading leveraged products such as CFDs. You should not risk more than you can afford to lose, it is possible that you may lose all your initial investment. You should not trade unless you fully understand the true extent of your exposure to the risk of loss. If the risks involved seem unclear to you, please seek independent advice. For further details please refer to Financial Instruments Description and Associated Risks. The information contained in the website has been prepared by Emporium Capital K.A Limited, a Cypriot Investment Firm, operating under license number CIF358/18 issued by the Cyprus Securities and Exchange Commission, and, except otherwise specified herein, is communicated by Emporium Capital K.A Limited. Although this website is accessible worldwide, the publications are only intended for use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. The products and services referred to in the publications are not intended for recipients residing in countries where the provision of such products and services would constitute a violation of applicable legislation or regulations. It is the sole responsibility of any recipient employing or requesting a product or service to comply with all applicable legislation or regulations. >> view more