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

With U.S. markets closed  today in observance of the Martin Luther King Jr. holiday, a busy week kicks off overseas. The annual World Economic Forum returns to its
usual calendar dates in Davos, with the war in Ukraine and the strains on the global
economy expected to dominate the talking points. China will release a slew of economic data tonight, including Q4 GDP and December’s retail sales.  Investors are split as to whether the Bank of Japan will further adjust their 10-year yield strategy on Tuesday evening. The yen continues to surge after the central bank widened its target band last month. In the U.S., a packed calendar is highlighted by
Wednesday’s PPI and retail sales releases. With inflation falling as demand cools, it will be interesting to see how consumer spending performed during the holiday season. Other U.S. events of note include regional manufacturing surveys, housing numbers, and earnings reports from Goldman Sachs, Morgan Stanley, Netflix, and
Procter & Gamble. Also, Treasury Secretary Yellen has already warned Congress that the U.S. will likely reach its borrowing limit on Thursday. Expect the contentious debt ceiling battle to heat up this week and continue into mid-year, when extraordinary measures could be exhausted. Elsewhere, UK consumer prices are anticipated to ease again but remain above 10% YoY, while the country also
posts employment data and retail sales throughout the week. [1]

Recapping Last Week

U.S. equities rallied for a second straight week as cooling inflation expectations
boosted investor sentiment. The Russell 2000 and Nasdaq Composite Indexes soared
5%, while the S&P500 gained 2.5%. International stocks continued to outperform
domestic names, boosted by ongoing U.S. dollar weakness. The MSCI EAFE Index
jumped 4%+ for the week and is now up 7% YTD (see tweet here). Nine of 11 S&P500
sectors posted gains, led by consumer discretionary, technology, and real estate.
Financials reversed early losses on Friday after major U.S. banks beat earnings
expectations but warned of lingering headwinds. Commodity prices jumped, with crude oil rising 8%+ and copper 7.5% on signs of improving Chinese demand, while gold added 2.8%. U.S. Treasury yields fell after December’s CPI report, which
revealed a 0.1% decline MoM after a sharp drop in gasoline prices. Consumer prices
remained elevated at +6.5% YoY, but it marked the smallest annual increase since
October 2021. U.S. consumer sentiment rose to a nine-month high in January but
remained well below pandemic-era highs, as rising interest rates and recession fears kept the outlook cautious. One year inflation expectations dropped to 4%, the lowest
since April 2021. In other news, U.S. small business optimism remained low in
December as hiring challenges persisted, while a New York Fed survey showed a large increase in credit card balances, with nearly half of cardholders carrying debt month to month.  Internationally, the World Bank slashed its GDP forecasts for 2023 due to rapid central bank policy tightening. Eurozone investor confidence improved in January, as investors foresee a shallower recession than initially feared. UK GDP ticked up 0.1% in November, but the Bank of England predicted the economy will contract the first half of 2023. In Japan, Tokyo’s core consumer prices rose 4% YoY in December, bolstering expectations for monetary policy changes. Finally, China’s
trade fell less than forecast in December and still managed growth YoY for 2022. CPI
accelerated on higher food prices, and mobility and spending data rose in late
December after zero-Covid policies ended. [2]

Chart of the Week: 

Small cap stocks finished strong the first week of the year and doubled down last week, advancing all five trading days and surging 5%+. The Russell 2000 Index RUT) breaking above both the 50- and 200-day exponential moving averages (EMA) after a year-long downtrend. Technical momentum is strong with the MACD back in positive territory and the 20-day EMA crossing above the 50-day EMA. Potential resistance looms near $1,900 but it appears the small caps may have turned a corner. 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.

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