Weekly Market Report: January 27, 2023

Favorable market trends in place thus far in the first month of 2023 stayed intact last week with a very busy economic calendar and fourth quarter earnings reports the primary market forces. A refreshing blackout period on Fed speaking engagements in anticipation of this week’s FOMC meeting left equity and bond markets focused on fundamentals and they seem to be applauding what they see. U.S. stocks were up approximately 2.5% with technology, REITs, and shadow technology leading the way while non-U.S. developed (+0.9%) and emerging markets (+1.4%) continued to add to their impressive January. Interest rates edged slightly higher with the 10 yr UST sticking around the 3.5% mark but remain down 20-30 bps on the year. Commodities were down slightly with oil (-2%) dropping back below $80 and the USD was flat for the week (-1.5% YTD).

Market Anecdotes

  • We’re now almost a third of the way through a relatively sub-par 4Q earnings season with the bottom line at -5.0%, top line growing 3.9%, profit margins compressing to 11.4%, and forward earnings priced at approximately 17.8x.
  • Decelerating PCE inflation and economic growth were evident with last week’s economic data and markets seem to be comfortable with trends on both fronts.

  • Markets are pricing a 25 bps rate hike this week and another at the March FOMC meeting, consistent with a ‘soft- landing’ view of the economy, taking Fed funds rate up to 450-475.

  • While M2 growth has fallen from 26% YOY at the pandemic peak to 0% recently, consumer savings, bank deposits, and money market funds all remain very elevated.

  • A close look at U.S. housing market metrics shows how rising interest rates have translated to notably higher mortgage debt service but risks of downward pressure in housing prices leaving large swaths of homeowners with negative equity, ala 2008, is still fairly remote.

  • Slowing global growth, falling leading economic indicators, contractionary PMIs, and inverted yield curves have most economists forecasting recession but the mix of weakness and resilience becomes clear when viewed across labor markets, liquidity, and personal consumption.

Economic Release Highlights

  • The December PIO report revealed inline and decelerating YOY PCE headline and core inflation of 5.5% vs 5.5% and 4.4% vs 4.4% alongside MOM readings of 0.1% vs 0.0% and 0.3% vs 0.3%.
  • The December PIO report showed strong Personal Consumption Expenditures (2.1% vs 2.6%) and inline/accelerating Personal Income growth of (0.2% vs 0.2%).
  • January U.S. flash PMIs (C, M, S) of 46.6, 46.8, 46.6 were slightly above consensus estimates.
  • January non-U.S. PMIs (C, M, S) show Japan (50.8, 48.9, 52.4), Eurozone (50.2, 48.8, 50.7), U.K. (47.8, 46.7, 48.0)
  • The first estimate of 4Q GDP registered 2.9%, slightly ahead of consensus 2.7% but squarely within the forecast range of 1.2% to 3.5%.
  • December Durable Goods Orders came in ahead of consensus for New Orders (5.6% vs 2.8%), Ex-Transportation (-0.1% vs -0.2%), and Core Capital Goods (-0.2% vs -0.2%).
  • New Home Sales for December of 616k registered right at the forecasted consensus call. Pending Home Sales grew 2.5%, well above the consensus call of -1.0%.


This communication is provided for informational purposes only and is not an offer, recommendation or solicitation to buy or sell any security or other investment. This communication does not constitute, nor should it be regarded as, investment research or a research report, a securities or investment recommendation, nor does it provide information reasonably sufficient upon which to base an investment decision. Additional analysis of your or your client’s specific parameters would be required to make an investment decision. This communication is not based on the investment objectives, strategies, goals, financial circumstances, needs or risk tolerance of any client or portfolio and is not presented as suitable to any other particular client or portfolio.
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