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The latest inflation data for the US underscored the ongoing inflation problem the FED has, and while the markets are hoping for a pause, or cut, on the latest numbers this is unlikely. The battle to control inflation is far from won.
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In the latest market update, we look at stronger economic data from the US driving inflation and FED rates higher. We also cover Europe, Asia and Australia. Risks seem elevated with regards to future market action! A wake-up call to Bulls?
CONTENTS
0:00 Introduction
1:30 Earnings and PEG
6:24 PCE Read
9:45 New Home Sales
11:39 US Markets
14:15 Oil Prices And the USD
17:10 European Markets
19:35 Asian Markets
21:20 Australian Market
23:54 Crypto
24:11 Summary and Conclusion
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Stocks have enjoyed an upbeat start to the year on hopes that the Fed will abandon its hawkish rhetoric and pilot the economy to a soft landing. Traders are betting that the Fed will raise its benchmark rate to a peak of 5.1% in July, largely in line with the forecasts of Fed officials.
Many in the markets are spinning a yarn about how the inflation rate will drift lower – bobbing on the wind like a snowflake, melting away to a nice round 2%. Well, I have to tell you, I think that snowflake is in the eye of a hurricane – literally the calm before the storm. This story of a quiet adjustment is a best misleading, at worse an opportunity for others to transfer risk to the unsuspecting and make money off their backs.
A parallel to those property market “experts” who keep saying the property market is about to recover and you should buy now.
All this is fiction, as the macroeconomic backcloth points to something else, and much more destructive – soon the hurricane will be in full force. It is likely that the US economy will be in recession by the second half of 2023. This flips upside down the widely held belief that the 1st half of this year would be weak, but the second half would see a strong rebound in stocks and GDP. With the US there, other economies including Australia will get caught in the downdraft.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
While some market analysts are calling a significant rise as inflation is crushed, others are more negative, seeing a potential drop in the markets, before a pivot – but not for another year or so. Investment sentiment is out of line….
So, the question is, are further market falls likely? How low will corporate earnings go?
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
The FED lifted by the expected 25 basis points overnight. In the press conference he was still underscoring the need to strangle inflation but was also sanguine on the markets – which traders took as a positive sign.
That said, the disconnect between the FED and the markets continues, suggesting further short-term strength, before reality sets in, or the FED really backflips.
Disinflation is now the new watch word!
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
In this week’s market update we as always start in the US, cross to Europe, Asia and end in Australia. Markets have started to look through the recession fears it seems, banking on the Fed slowing its rake hikes, and reversing later in 2023.
Yet the signals are still mixed, and earnings are clearly under pressure in many market sectors. But it does seem to me to be a question about seeing the wood for the trees. The bigger trend on markets still is pointing lower, despite the short term moves higher. We are not, I think out of the woods yet… remembering Central Banks over nearly 20 years have tried to engineer growth through massive stimulation and debt, and economies have been distorted beyond belief. As support is removed, asset values are still over done, and the cost of debt rises.
The Dow cut losses to close higher Friday, as investors bought the early-day dip in banks following a string of better-than-expected results, though concerns about a weaker economy linger. In the end the S&P 500 and Nasdaq finished at their highest levels in a month on Friday, leaving the S&P 500 up 4.2% so far in 2023.
For the week, the S&P 500 gained 2.7% and the Dow rose 2%. The Nasdaq increased 4.8% in its biggest weekly percentage gain since Nov. 11. The CBOE Volatility index -Wall Street’s fear gauge -closed at a one-year low. The U.S. stock market will be closed Monday for the Martin Luther King Jr. Day holiday.
CONTENTS
0:00 Start
0:15 Introduction
1:15 US Markets
4:10 Consumer Sentiment
5:59 US Dollar
7:05 Oil
7:30 Best Stocks From Goldman
10:30 Europe
12:55 Global Growth Slowing
14:00 Gold
14:15 Asia
15:35 Australia
18:30 Crypto SEC Action
20:00 Bitcoin
20:25 Summary and Conclusion
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
US CPI came out pretty much as expected, with headline rates falling, thanks to significant falls in gas (petrol) prices at the pumps, despite rises in food and shelter costs.
The markets lapped this up sending the indices mainly higher. along with gold, while bond yields and the US dollar slid.
However, Fed officials were out in force saying rates need to run higher for longer, so once again out of step with market expectations.
Next signal will be quarterly earnings from Friday. Still more volatility ahead.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
U.S. stocks ended up sharply on Wednesday, with the S&P 500 and NASDAQ gaining more than 1% each as investors were optimistic ahead of an inflation report that could give the Federal Reserve room to dial back on its aggressive interest rate hikes.
Investors are holding their breath in anticipation of Thursday morning’s Consumer Price Index inflation report —arguably the most important piece of economic data so far this year. There’s a lot riding on the outcome—if inflation keeps falling, that could support a market rally, while higher-than-expected inflation could send stocks plummeting.
After a stormy 2022, the Federal Reserve’s battle against inflation has become the chief preoccupation on Wall Street —with investors ascribing significant meaning to any economic data that could indicate what the Fed does next.
Recent data has been muddy. December’s hotly anticipated jobs report had something for everyone —easing wage growth and easing unemployment. Fed meeting minutes, released last week, also didn’t offer much in the way of conclusive answers.
That’s why this CPI report will command attention and go a long way toward shaping market expectations for the first Federal Reserve policy meeting of the year. The Fed Funds Futures market still sees a high probability of a quarter percentage point rate hike on February 1, but the results of the CPI report could change that.
Yet inflation swaps, transactions in which one investor agrees to swap fixed payments for floating payments tied to the inflation rate, are indicating that investors believe inflation will come down to 2.5% in the next seven months, even as the Fed’s own projections say inflation will remain well above 3% until 2024.
Bets that the Fed will soon pivot away from elevated interest rates, even as officials say that they won’t, could mean more market volatility lies ahead.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Significant news from the Federal Reserve (FED) and The Peoples Bank Of China (PBOC) shows how divergent their two monetary policy paths are. The FED is committed to lifting rates sufficient to snuff out inflation (despite the markets continually seeking a pivot) and withdrawing stimulus while the PBOC is seeking to provide additional support for the Chinese economy, including the property sector.
This divergence is striking and will have significant impact on exchange rates and global financial flows. Both though are talking about Central Bank Digital Currencies.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
So the FED hiked again, and lifted the expected terminal rate to above 5% with the majority of board members agreeing this this projection.
So, the markets and the FED are now not on the same page, with traders still betting on lower rates during 2023.
In addition, a slowing growth rate and higher unemployment means future earnings will be lower, suggesting that markets are over optimistic.
Things are as they say, complicated.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Today’s post is brought to you by Ribbon Property Consultants.
