The Asset Guidance Group Monday Outlook for the Week Ahead Starting Monday July 31, 2023

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

Another busy week awaits as the calendar turns to August, highlighted by U.S. jobs data and corporate earnings along with rate decisions for the UK and Australia. With the FOMC on hold until September, economic data will influence whether the U.S. has seen a peak in interest rates. The backdrop of ebbing inflation and strong growth has fueled stock prices thus far, but policymakers are wary of a reacceleration of price pressures.

The U.S. employment picture is expected to continue to trend towards moderate growth, and average hourly earnings will be closely watched in Friday’s government report. The private sector ADP and JOLTS job openings reports will land on Tuesday and Wednesday. ISM PMIs will also be released, and although services have led the U.S. economy for months, investors would like to see less severe contraction in manufacturing to support bullish sentiment.

Earnings season is wrapping up with big reports on tap from Apple, Amazon, Qualcomm,  and Advanced Micro Devices. Preliminary Q2 non-farm productivity and factory orders complete the domestic agenda.

Overseas, the Bank of England has seen inflation slow, but wage growth persists, meaning a likely 25bps hike on Thursday and more later this year. Economists are split on  whether Australia’s Reserve Bank will hike or hold with consumer inflation and PMIs fading. Europe’s flash CPI estimate will be released today along with Q2 GDP, which may influence future rate hike expectations.

Finally, China’s private sector and Caixin PMIs will filter in throughout the week. [1]

Recapping Last Week

U.S. equities rose as investors assessed better-than-expected economic data, central bank actions, and the latest batch of corporate earnings. The Nasdaq Composite Index gained 2%+, while the S&P500 and Russell 2000 added 1%+. Seven of 11 S&P500 sectors gained ground, led by a 5% jump in communications. Strong revenue and earnings growth at Meta, Microsoft, and Alphabet were fueled by a pickup in advertising and cloud storage. Financials were flat after regionals Banc of California and PacWest Bancorp agreed to merge.

Crude oil prices soared 5% as the global demand forecast improved, sending energy stocks higher despite disappointing earnings from giants Exxon Mobil and
Chevron. The first estimate of U.S. Q2 GDP growth came in above estimates at 2.4%,
powered by solid consumer spending, while inflation cooled further in June. The Core PCE Index increased just 0.2% MoM, and the YoY gain of 4.1% was the lowest since
September 2021.

Compensation costs rose less than expected, fueling hopes that the Fed’s 25bps rate hike at last week’s meeting may be the last in this cycle. Treasury yields lifted as the economic data showed continued improvement. Consumer confidence reached a two-year high in July, while durable goods orders for June rose a much betterthan-expected 4.7%. Weekly jobless claims sank to 221K, while evidence of a bottoming housing market emerged. Pending home sales increased in June for the first time in 4 months, although new homes sales were hampered by high borrowing costs.

Internationally, global PMIs stayed in expansion in the U.S. but showed signs of weakening business activity in the UK and Europe. The European Central Bank raised rates for a ninth consecutive time, but sentiment is shifting towards a pause. German inflation fell in July and business sentiment dropped for a third straight month as recession fears persisted. Australia’s CPI slowed to 6% in the June quarter from 7% prior. Lastly, the Bank of Japan surprised markets by loosening its yield curve control, expanding the range for 10-year bonds to 100bps from 50bps around the 0% target. [2]

Chart of the Week:

Natural Gas Futures (/NG) have been stuck in slow motion recovery since a momentary break above $3 in Feburary that was followed by heavy selling down to $2 in March. With record heat in the lower 48 states this summer, and forecasts for high temperatures in August, combined with the sharply bullish moves already recorded in heating oil,  gasoline, and crude oil, some traders may feel the backdrop is bullish. Although choppy, price has been in an intermediateterm uptrend since April. On July 20 price broke above a short-term downtrend followed by a week-long pullback into a zone that could be technical support, creating a bullish setup. A bounce higher could meet initial resistance at $2.80, but a case could be made for a sharp rally back to $3. Natural gas prices have been slower moving lately, but don’t tend to stay that way for the volatile commodity. 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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The Asset Guidance Group Outlook for the Week Ahead Starting Aug 7, 2023

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