Weekly Market Report: January 12th, 2023
Markets were relatively firm last week, in what was the first full trading week of the year. Key markers last week included the beginning of the 4Q earnings season, geopolitical developments (Yemen, Taiwan), and a relatively light economic calendar including December inflation data. Equity markets looked past a lackluster start to earnings and a hotter than expected December inflation reading. U.S. (+1.8%) and developed international (+1.2%) posted gains while emerging markets (-0.6%) were weighed down by China which fell 2.1%. Bond yields declined pushing the 10yr UST yield back below 4% while the USD and commodity markets were both relatively flat on the week.
- A great series of charts from Bespoke takes a long-term look at the U.S. stock market, reminding us all that a disciplined and resilient ‘get invested stay invested’ strategy is the most sound approach to equity market investing.
- Market priced probabilities for a March rate cut stands at 75% with a soft PPI working to offset the firm CPI last week. Meanwhile, the labor market remains strong with weekly claims last week (202k) falling to their lowest mark since October.
- Fourth quarter earnings season kicked off last week with a relatively low bar on S&P 500 consensus earnings estimate of 1.3%. The larger issue is likely surrounding forward guidance and the stability of the 12% consensus earnings estimate for full calendar 2024.
- Following an early week SEC twitter hack (and premature crypto ETF announcement), the SEC approved 11 spot Bitcoin ETFs and a BitMEX Research estimated $523mm of inflows in 3 days.
- A Bloomberg article last week highlighted an IMF report noting global governments will be selling a net. $2.1t in new bonds to finance deficit funding of government operations, a 7% increase over 2023. Sadly, the U.S. is furthest in the crowd from balancing its checkbook.
- The U.S. Senate is likely to move forward with a CR this week to avoid a looming January 19th government shutdown funding deadline.
- Attacks in Yemen (Bab-el-Mandeb Strait) have reverberated north to the Suez Canal where traffic is down considerably. Unfortunately, drought conditions have forced the Panama Canal also to operate well below capacity with supply chains and global logistics again being challenged.
- Taiwan elected VP and DPP candidate Lai Ching-te President surely to the dismay of Chinese officials who refer to Lai as a “separatist”. Tensions are expected to remain high.
- Year-end data from China suggests improving demand conditions (import/export data) but weak private sector credit demand and a clear deflationary trend point to a tepid growth backdrop.
Economic Release Highlights
- December headline and core CPI registered 3.4% and 3.9% respectively while MOM readings both came in at 0.3%.
- December headline and core PPI registered 1.0% and 1.8% respectively with MOM readings of -0.1% and 0%.
- December NFIB Small Business Optimism Index improved slightly to 91.6, beating the spot consensus forecast of 90.6.