The Asset Guidance Group Monday Outlook for the Week Ahead Starting Monday Aug 28, 2023

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Here’s The Asset Guidance Group Outlook for the Week Ahead… 

First, a reminder that this newsletter will not be published next week but will return on September 11. A rough month of August could end with more volatility as a slew of toptier data emerges, including inflation and employment reports. In the U.S., non-farm payroll growth is expected to moderate further on Friday while average hourly earnings are forecast to hold steady at +4.4% YoY.  Thursday’s consumer data will likely show that personal income growth is not pacing with spending. Additionally, the July core PCE price index may tick up MoM, prompting speculation about more rate hikes.

Consumer confidence, the second estimate of Q2 GDP, pending homes sales, and ISM manufacturing PMI are also on the domestic agenda. Overseas, recent economic data have stoked recessionary fears in Europe, but their CPI estimate is expected to stay above 5% YoY when released on Thursday, keeping pressure on the European Central Bank to raise rates in September. China publishes PMI results as investors become increasingly frustrated with the government’s leisurely approach to economic stimulus.

China’s slowdown is already being felt in Australia, so keep an eye on retail sales and
inflation figures from down under this week. [1]

Recapping Last Week

U.S. equities completed an up-and-down week with mixed performance as investors parsed Federal Reserve Chair Powell’s latest remarks on monetary policy at the Jackson Hole Symposium. The Nasdaq Composite Index gained 2.25%, while the S&P500 added 0.8%. The Russell 2000 slid 0.3% as regional banks underperformed due to ratings downgrades by S&P Global. Seven of 11 S&P500 sectors gained ground, led by technology after Nvidia jumped 6%+ for the week despite giving back most of its postearnings release gains. U.S. Treasury yields rose at the short end after Powell’s Friday speech, where he acknowledged that strong economic growth could warrant further rate hikes to prevent a resurgence in inflation. However, he also said that rates are now high enough to be considered restrictive, and that the committee will proceed carefully to assess the impact of tightening thus far. The probability for no rate hike at the September FOMC meeting remained above 80%, according to fed funds futures. In other news, U.S. business activity neared stagnation in August, with S&P Global composite PMI falling to 50.4 from 52.0 prior and manufacturing contracting for a fourth straight month.  Durable
goods orders, excluding volatile transportation figures, increased only slightly in July,
suggesting cautious capital investment. Housing data was mixed, with new home sales rising 4.4% in July, while existing home sales fell 2.2% and the median sales price ticked up to $406.7K. Mortgage applications sank to a 28-year low as rates averaged 7.2%. Internationally, China’s central bank disappointed investors after making smaller-than-expected interest rate adjustments. In Japan, BOJ core inflation surged to 3.3% YoY in July, above estimates and the prior month’s reading
of 3.0%. Europe braced for recession as business activity contracted once again in August. Germany’s services PMI registered in the negative for the first time in eight months and GDP saw zero growth from April to June. Lastly, Britain’s economy
appears headed for a downturn as PMIs reflected broader weakness and manufacturing activity plunged to May 2020 lows. [2]

Chart of the Week:

The U.S. Dollar Index ($DXY) has been trending lower since its high point nearly a year ago. Momentum slowed after the January low, but a pattern of lower highs and lower lows continued a downward channel until last week, when the greenback broke out to the upside. The moved pulled the RSI into overbought territory for the first time since the downtrend began. The 50-day EMA has not yet crossed above
the 200-day, but may do so  shortly as they converge. The hawkish tone from Fed Chair Powell on Friday may provide bullish momentum going forward for the dollar. Also take note of the purple comparison line for international developed
market stocks (MXEA) and their strong inverse correlation to the dollar, averaging over 85% for the past year. This tracks well considering a stronger dollar implies relative weakness for foreign currencies and their equity markets. Just before the dollar broke above its technical channel, MXEA broke down. If this trend continues it could spell further difficulty for many foreign markets versus the U.S.  Click here to view chart. [3]

Sources: [1] [2] [3] tdainstitutional.com tdainstitutional.com; Any performance data reported by Asset Guidance Group, LLC has been grouped and reported by kwanti.com, imported from TDAmeritrade Institutional, Risk categories as scored by Grable-Lytton test and grouped by like risk tolerance levels; NOTE: individual account performance grouped solely by model classification type in terms of risk tolerance. Individual portfolios include equivalent equities exposures via like models, but many may hold additional investments like structured notes, fixed income investments such as CDs, bonds, and other individually preferred securities. 1-Week risk score denotes overall performance of all AGG client portfolios grouped together by like-risk tolerance scores not by identical investment allocations; [4] [5] Macro Monday (tdainstitutional.com);

*All other Asset Guidance Group analysis, www.stockcharts.com; All index- and returns-data from Yahoo Finance; news from Reuters, Barron’s, Wall St. Journal, Bloomberg.com, ft.com, guggenheimpartners.com, zerohedge.com, ritholtz.com, markit.com, financialpost.com, Eurostat,0020Statistics Canada, Yahoo! Finance, stocksandnews.com, marketwatch.com, wantchinatimes.com, BBC, 361capital.com, pensionpartners.com, cnbc.com, FactSet; Chart from Indeed’s Hiring Lab.

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

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