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

A typical less dense calendar awaits following the U.S. labor market reports, but there are a few major announcements stacked towards this week’s end. The debate over the size of the Fed’s next rate hike may well come down to December’s U.S. CPI report on Thursday. Expectations are for prices to have cooled further from the prior month, but the Fed may still lean towards a second straight half-point increase at the February meeting. That said, traders are currently wagering 75% odds of only a 25bps hike, according to fed funds futures. For investors, after 10+ years of little alternatives to stocks, the 3-month Treasury bill is now yielding 4.52%, a full percentage point more than 10-year notes. This type of yield inversion has occurred before each of the last 8 U.S. recessions, with a usual lag of 12 to 18 months. On Tuesday, Fed Chair Powell and other global central bankers will speak at an international symposium in Stockholm. Other U.S. events of note include consumer credit and sentiment, while Q4 earnings season gets underway with
results from JP Morgan, Bank of America, and Citigroup. Overseas, China’s consumer and producer prices are forecasted for slight upticks but remain well below the rest of the developed world, while Australia’s CPI is expected to outpace the prior month’s reading. Across the pond, the UK releases monthly GDP figures on Friday, and a quiet week in Europe is highlighted by German industrial production and Eurozone investor confidence. [1]

Recapping Last Week

The first week of 2023 saw U.S. equities seesaw to modest gains after economic data
revealed positive developments in the Federal Reserve’s efforts to bring inflation down. The S&P500 Index gained 1.5%, while the Russell 2000 added 1.8% and the Nasdaq Composite rose 1%. Ten of 11 S&P500 sectors finished positive, led by communications, basic materials, and financials. Technology lagged as mega-cap names like Apple, Tesla, and Microsoft struggled. Crude oil sank 8.5% as demand
concerns lingered, while gold prices gained 2.3% to reach a 7-month high. U.S. Treasury yields sank along with the U.S. dollar after Friday’s non-farm payrolls for December showed slowing wage growth despite historically low unemployment
and solid job gains. The welcome news lifted hopes that the Fed’s aggressive  rate-hiking campaign may be nearing an end. Demand for labor remained high, but other
economic news reflected trends towards disinflation and supply chain
normalization. U.S. manufacturing shrank for a second straight month, with the ISM prices index plunging to the bottom 5% of all periods, after having recently reached
the highest levels in 40 years. Services activity plummeted into contraction territory
for the first time in 2.5+ years, offering more evidence that inflation is moderating.
U.S. factory orders also fell in November, led by a 2.1% decline in durable goods.
Although minutes from the December FOMC meeting expressed a hawkish tone, last
week’s data gave investors some much needed optimism. Internationally, Eurozone
inflation dropped for a second consecutive month in December, but with CPI at
+9.2% YoY, the central bank’s path towards higher rates is unlikely to change. In China, business activity remained weak in December, and the country planned to relax restrictions on developer borrowing to further bolster the beleaguered real estate sector. [2]

Chart of the Week: 

Gold futures (/GC) have had a positive start to 2023, up 2%+ in the first week and retracing over 50% of last year’s decline. That downtrend reversed in November with strength and has been riding the 20-day exponential moving average ever since. December was more consolidation than uptrend, coiling up into an ascending triangle pattern that broke out in this year’s first trading session. The throwback to support came quickly, and the subsequent bounce came just as fast on the heels of Friday’s jobs report. The U.S. dollar’s drop also contributed to commodity strength. 
The general consensus that the Fed will slow its rate increases and continued dollar weakness may support a positive outlook for gold in 2023. 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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