The Asset Guidance Group Monday Outlook for the Week Ahead Starting Monday March 6, 2023

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

Interest rates have been driving equity markets recently and will remain in focus with the U.S. jobs report, Treasury auctions, and central bank decisions all on tap this week. Additionally, Fed chair Powell begins his two-day appearance before Congress on Tuesday, which will be closely followed for any hints of faster or slower
monetary tightening. According to fed funds futures there is a 70% probability of a 25bps hike at the March 22 meeting, with 30% odds of a 50bps hike. February nonfarm payrolls are expected to be above 200K, nowhere near January’s shocking 517K that sent rates on their recent ascent, but still indicative of a hot labormarket. The ADP and JOLTS releases on Wednesday will add more color to the
employment picture. Internationally, there are interest rate verdicts from central banks in Australia, Canada, and Japan to keep currency traders on their toes. This will be BOJ governor Kuroda’s last meeting, and with inflation well above target and the yen flagging, it begs the question whether the groundwork for policy change might be laid. The Bank of Canada signaled a pause at its last meeting, which may
have been premature given core inflation readings. Elsewhere, China’s trade data for January and February, which includes the Chinese New Year, could reveal how much pent-up demand has been unleashed following relaxation of restrictions.  [1]

Recapping Last Week

Despite rising interest rates, U.S. equities clawed back earlier losses to finish positive for the week as signs of strength emerged in the global economy. The Nasdaq Composite index rose 2.5%, while the S&P500 and Russell 2000 Indexes gained 2%. Nine of 11 S&P500 sectors ended higher, led by advances in basic materials and industrials. Crude oil and gold posted solid gains, while Bitcoin tumbled 3.5%+ after crypto-friendly U.S. bank Silvergate cast doubts on its ability to stay in business. U.S. Treasury yields eased Friday but not before the 10-year note reached 4% for the first time since November as labor market strength and global inflation persisted. Jobless claims remained below 200K for the seventh straight week. U.S. durable goods orders sank in January due to an expected large drop in aircraft bookings, but
underlying business investment climbed 0.8%, the fastest gains since August. U.S. manufacturing contracted again in February and prices paid ticked up, but the ISM services index continued to expand at a robust pace. Recession fears remained elevated however, as consumer confidence worsened in February on a deteriorating short-term outlook. Overseas, China’s February factory activity boosted hopes for
stronger global growth in 2023, with manufacturing PMI surging to 52.6 and services PMI lifting to 56.3. Moody’s quickly upgraded its GDP estimates for China’s economy to 5% for this year from 4% previously. In Europe, January producer prices declined much more than expected, but February’s CPI stayed stubbornly high at +8.5% YoY
and core prices rose from the prior month, making a 50bps rate hike all but certain for the March 16 ECB meeting. Australia’s central bank may reconsider how aggressive it needs to be at this week’s meeting after inflation eased in January and Q4 GDP came in lower than expected. Finally, Bank of Japan governor nominee Kazuo Ueda reiterated a likely steady course for monetary policy in parliamentary testimony.
Tokyo’s core consumer inflation slowed in February as government energy subsidies kicked in, while industrial production and export growth fell sharply in January. [2]

Chart of the Week:

Small cap stocks have been outperforming large caps so far this year, with the Russell 2000 Index (RUT) gaining over 9% versus 5% for the S&P500. After a month of lower highs and lower lows, the trend
reversed late last week. This small change happened right at significant technical support near $1,885, which was also a Fibonacci support level measured from the 2022 decline, and just above the 50-day moving average. The MACD never turned negative and the RSI stayed above 40 through the entire pullback, indicating underlying
trend strength. Friday’s rally pushed the index over its down sloping resistance line, which it will need to stay above in order for more bullish signals to materialize.

 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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