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

It’s a busy week on tap, highlighted by a pair of announcements in the U.S. On
Thursday the first look at Q4 GDP arrives, with growth expected to moderate
from the prior quarter as consumer spending has slowed. Then on Friday, if the
Core PCE Price Index eased further in December, expect the debate to
commence on whether the Fed’s next rate hike could be the last in this cycle.
Earlier in the week, global flash PMIs will reveal if the drop in energy prices has
created a boost in business activity for the first part of January. Earnings season
in the U.S. ramps up with reports due from Microsoft, Tesla, Boeing, Intel,
Chevron, and others. Other U.S. events of note include durable goods, new and
pending home sales, and personal income and spending figures. Internationally,
on Wednesday the Bank of Canada is expected to step down to a 25bps rate rise
after data showed inflation slowed in December. And finally, the Bank of Japan
will release the summary of opinions and minutes from the December meeting,
which may provide further color on its shocking decision to adjust the yield
curve band late last year. [1]

Recapping Last Week

Concerns that the Federal Reserve may go too far with interest rate hikes and push the economy into recession left U.S. equities with mixed  results, despite a strong Friday rally. The Russell 2000 Index fell 1%, while the S&P500 slipped 0.66%. The Nasdaq Composite managed a gain of 0.55%. Eight of 11 S&P500
sectors finished lower, with industrials, utilities, and consumer staples all slumping around 3%. Crude oil rose 2% as traders remained hopeful that demand from China would accelerate as their bumpy reopening process continues. U.S. Treasury yields fell after economic data  revealed that business conditions weakened considerably in early January and inflation continued to moderate.

The Empire State Manufacturing Index saw its worst monthly output since mid-2020, with prices paid and received extending downward trends. The
Philadelphia region report, seen as better barometer for nationwide conditions,
improved slightly but remained in contraction. U.S. PPI declined sharply in
December, with falling gasoline and food costs contributing to a 0.5% MoM
drop. U.S. retail sales fell more than expected in December, while housing starts and existing home sales slid further. According to a Reuters poll, economists now expect the Fed to raise rates 25bps at the next two meetings and then pause, which is in line with fed funds futures pricing. However, last week some
FOMC members signaled a more hawkish forecast despite the weak economic data. Large technology companies announced more layoffs, but the labor market remained tight, with weekly jobless claims dropping below 200K.
Internationally, China’s GDP beat expectations in Q4 but grew just 3% in 2022, far below target and the worst performance in 50 years outside of 2020. In Japan, the central bank made no additional policy adjustments, disappointing bullish yen traders, but pressure for action mounted with core consumer prices rising 4% YoY in December. Finally, in the UK, a spike in food and beverage prices offset a slight decline in December’s CPI, which remained well above 10% YoY.
Officials fear a wage-price spiral as pay growth jumped in the resilient labor market. [2]

Chart of the Week: 

Copper futures (/HG) were down in 2022 but started to recover towards the end of
the year. This year has been a different start, rising 11% in the first three weeks and erasing most of last year’s drop. With all of copper’s industrial uses, a slower economy typically lowers  demand and therefore prices.  Conversely, optimism in China removing its zero-covid policy as well as a weaker U.S. dollar has had the opposite effect. Technically, this rally has pulled the MACD to its highest point in nearly two years. It’s also triggered a Golden Cross, with the 50- and 200-day moving averages crossing, indicating a bullish trend change. 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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