The Asset Guidance Group Monday Outlook for the Week Ahead Starting Monday March 20, 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 finished mixed as unnerving interest rate volatility offset encouraging
signs on the inflation front. The Nasdaq Composite jumped 4%+, buoyed by a large drop in Treasury yields, while the S&P500 added nearly 1.5%. The Russell 2000 slid 2.5%+ as uncertainties remained in the financial sector. Seven of 11 S&P500 sectors gained ground, led by technology and  communications, while financials slipped another 6%. Silicon Valley Bank declared bankruptcy to preserve value for its remaining useful assets, while First Republic Bank received a large capital injection from other large U.S. banks in an attemptto stay afloat. U.S.Treasury yields plunged, and the dollar surged midweek as investors flocked to risk-off assets. Crude oil tumbled 13%+ to below $70 per barrel on elevated recession fears, while gold
continued its recent rally, climbing 6%. Bitcoin soared 32% as traders wagered that
the Fed would pause rate hikes due to the liquidity crisis among regional banks. U.S.
consumer inflation rose in February but was in line with expectations, up 6% YoY and
down from the prior month’s reading of +6.4% YoY. Median one-year inflation expectations declined by 0.8% to 4.2%, the lowest since May 2021, according to the monthly New York Fed survey. Fed officials expect shelter costs, a lagging indicator and one of the main drivers of inflation, to moderate over the course of this year. However, the news makes another rate increase likely at next week’s FOMC meeting, despite unrest in the banking industry. In other news, U.S. retail sales fell in February, a challenging month for consumer spending. The U.S. manufacturing sector
reported significant drops in new orders for March, while industrial production stalled in February. Consumer sentiment fell for the first time in four months in early March, even as inflation expectations declined. Signs of life emerged in the housing sector, with new construction increasing in February while sentiment improved. Internationally, the European Central Bank lifted rates by 50bps and signaled it was ready to supply liquidity to banks if needed. Credit Suisse shares were under pressure
before receiving a lifeline from the Swiss National Bank. Finally, China’s retail sales
for the first two months of the year matched estimates, but industrial production missed the mark as real estate  investment sank 5.7% from a year ago. [2]

Chart of the Week:

Turmoil in the banking sector has clearly increased recession fears, pressing crude oil futures (/CL) to their lowest point since 2021. Crude was already down over 40% from last year’s high, but last week’s drop sent it below significant technical support near $70 after holding it for the last four months. A slight reprieve came Thursday after Saudi Arabia and Russia met to discuss  market stabilization, and  Credit Suisse found backing. But Friday prices dropped back near the lows. The trend is down on all time frames and will need help to turn the tide.

 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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