The Asset Guidance Group Monday Outlook for the Week Ahead Starting Monday March 13, 2023

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

After a tumultuous week that seriously dented the longer term bullish prospects for equity indexes, investors get little chance to recover with this week’s scheduled slate of data. When trading opens today, the reaction of bank stocks and the broad market will be in focus after federal regulators announced Sunday that depositors of Silicon Valley Bank, along with Signature Bank in New York, would be paid back in full. U.S. CPI and retail sales are on the economic calendar, along with the European Central Bank’s monetary policy statement. If Tuesday’s U.S. consumer inflation numbers stay stubbornly high it opens the door for more aggressive rates hikes, even with last week’s stunning developments in the financial sector. U.S. producer prices will be released the next day along with retail sales, which will also impact Fed policy as consumer spending has ramped up this year. Still, some believe recent economic strength can be attributed to seasonality, and disinflation and slowing growth may return. Other U.S. events of
note include regional manufacturing surveys, consumer sentiment, and earnings from transportation bellwether FedEx. Overseas, the ECB has been playing catchup relative to the U.S. and is set to raise rates by 50bps on Thursday, with the terminal rate now estimated above 4%. China may reveal an upside surprise in retail sales numbers late Tuesday as domestic demand appears to be improving. [1]

Recapping Last Week

U.S. equities erased most of this year’s gains under the pressure of contagion fears associated with Silicon Valley Bank’s demise, while hawkish Federal Reserve testimony outweighed encouraging signs in the monthly jobs report. The Russell 2000 index of smaller companies 2000 Index, with its largest weighting being financials, plunged 8%+. The Nasdaq Composite and S&P500 skidded 4.5%+. Financials led all S&P500 sectors lower, diving 8.5% as the nation’s 16th largest bank was shut down after failing to raise capital, sparking a huge selloff across the sector. U.S. regional banks suffered their worst losses since the 2008 financial crisis. U.S. Treasury yields initially rose after Fed Chair Powell cautioned that rates are likely to head higher than previously anticipated and possibly at a faster pace if economic data warrants it. But concerns over bank contagion and hints of slowing inflation sent yields tumbling on Friday, and expectations for the next FOMC meeting shifted back towards a 25bps hike. While February payrolls increased by 311K, wage gains were muted and the unemployment rate ticked higher, fueling hopes for a cooling labor market. The JOLTS report offered further evidence that labor turnover is falling and wage pressure dissipating, even though job openings still far outnumber available workers. In other news, U.S factory orders declined in January as demand for transportation equipment and durable goods fell, while consumer credit expanded much less than
forecast. Internationally, the Bank of Canada became the first major central bank to pause rate increases, although still weighing whether future hikes will be necessary. The Reserve Bank of Australia also hinted at a tightening pause after lifting rates 25bps, as its heavily indebted households struggle with inflation and rising home loan
payments. Japan’s outgoing central governor Kuroda took no action at his final policy meeting. In China, trade declined in the January-February period, with imports sliding 10.2% YoY. The country’s consumer inflation slowed to the lowest rate in a year in February and producer prices were down 1.4% YoY. Finally, the UK reversed December’s contraction with a 0.3% monthly GDP gain in January, defying expectations for a seemingly inevitable recession. [2]

Chart of the Week:

U.S. regional banks took a big hit, with the S&P Regional Banks Index ($SPSIRBK) plummeting over 15% for the week. Technically this looks bad: breaking support, the MACD turning lower while still in negative territory, and solidly breaking 40 on the RSI, signifying bearish sentiment. That said, Friday’s low came in right at technical support throughout all of 2019, sparking a bounce into the close. This week will be pivotal for restoring confidence in the U.S. banking system. 

 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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