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

Inflation will dominate the headlines this week, with U.S. CPI arriving on Tuesday,
followed by UK CPI on Wednesday and U.S. PPI on Thursday. With the jobs market
still extremely tight, the Fed may have to hold rates higher for longer to get inflation
down to its desired target. U.S. consumer prices are anticipated to have increased
0.5% MoM in January, but to have slowed to +6.2% YoY from 6.5% previously. A
hotter-than-expected report would likely see the U.S. dollar continue its recent
recovery. After declining for two straight months, U.S. retail sales are forecast
to have picked up steam in January, despite rising gasoline prices. Other events
of note include manufacturing surveys from the New York and Philadelphia
regions, industrial production figures, and housing starts. Internationally, given
the weaker pound and strong earnings, British CPI has probably not slowed
significantly. GDP updates from Japan and the EU round out a light overseas
calendar. [1]

Recapping Last Week

U.S. equities pulled back from recent highs, accompanied by a spike in volatility as
rising interest rates weighed on investor sentiment. The Russell 2000 Index slumped
3.5%, while the Nasdaq Composite fell 2.5% and the S&P500 dropped 1%+. Ten of 11
S&P500 sectors finished lower, with communications diving 5%+ after shares of
Alphabet Inc. plunged on fears of losing ground to rival Microsoft in artificial
intelligence technology. Crude oil jumped 9% after Russia announced plans to cut
output by 500K barrels a day next month in retaliation against western energy
sanctions. U.S. Treasury yields rose, and the curve inversion deepened after a weak
30-year bond auction. In a speech Tuesday, Fed Chair Powell didn’t express a more
hawkish tone after January’s surprisingly strong jobs report but acknowledged that
it will take time to bring down inflation. The implication that interest rates will likely
stay higher for longer sent equity markets on a volatile ride and ultimately lower for
the week. In other news, U.S. exports fell in December as global economic activity
slowed, and the overall trade deficit rose 12.2% in 2022 to nearly $1T. U.S. consumer
sentiment increased modestly in February despite an uptick in one-year inflation
expectations. Federal Reserve data showed that consumer credit rose in December
by the smallest amount in two years as interest rates climbed, but a Bank of America
report revealed an uptick in post-Christmas spending, boosted by the resilient labor
market. Overseas, Eurozone retail sales fell 2.7% in December, while investor
confidence improved as recession expectations moderated. Germany’s industrial
production fell more than forecast in December, but a jump in large factory orders
stoked hopes of avoiding a more serious slowdown. In the UK, economic growth was
flat in Q4 2022, narrowly evading a technical recession, but shrank 0.5% in
December. The Bank of England indicated another rate hike is likely in March, citing
inflation risks. Australia’s central bank raised its cash rate 25bps and leaned towards
a more hawkish policy going forward. The Japanese yen initially climbed but
tempered gains after reports surfaced that Kazuo Ueda, who was not involved in the
ultra-low rates policy of the last decade, would be named the Bank of Japan’s next
governor in April. And finally, China’s factory gate prices fell more than expected,
but CPI rose 2.1% YOY in January as Lunar New Year spending surged. [2]

Chart of the Week: 

A notable upside breakout took place in the 10-Year Treasury Yield Index (TNX) last week, and the move may be dampening this year’s stock rally. Several trend-impacting events came together to suggest rates may be moving higher. First, price closed above the 50-day moving average and then bounced higher after retesting the level. Next, a descending trendline connecting lower highs from last year was clearly broken. And finally, a technical double bottom pattern was confirmed by a gap up and close higher last Monday. The double bottom suggests a potential target near the December highs at $39. Companies with higher debt loads or less certain revenue flows may find themselves out of favor if rates continue to rise. 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] SIMON portal, FIGmarketing.com; [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.