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

The focus this week shifts away from central banks and inflation and towards the
health of U.S. consumers. Tuesday’s retail sales report for April is expected to show a return to growth, as spending has remained resilient in the face of high inflation and banking sector turmoil. There are also earnings results to consider from top retailers Walmart, Target, and Home Depot. Debt ceiling negotiations are scheduled to resume early this week with little progress to report thus far. The beleaguered U.S. manufacturing sector will feature regional survey updates from the east coast. Other U.S. events include industrial production, housing starts, and existing home sales. Fed Chair Powell will deliver a speech Friday at a conference
in Washington DC. Moving overseas, Turkey will elect its next parliament and president as the country deals with runaway inflation. In Europe, the final estimates of Q1 GDP and April CPI will be  bookended by industrial production and German
PPI figures. Australia features the Q1 wage price index, employment numbers, and
minutes from the recent RBA meeting. Finally, expectations are sky high for China’s April retail sales and industrial production releases, even as recent business surveys have indicated some softening. [1]

Recapping Last Week

U.S. equity indexes once again traded within a narrow range to end the week with
mixed performance after a tame consumer inflation report. The Nasdaq Composite
Index rose 0.4%, while the S&P500 fell 0.3% and the Russell 2000 slid 1%+. Sector
breadth was largely negative, and while defensive sectors have outperformed
quarter-to-date, the increasing likelihood of a soft landing lifted consumer
discretionary and communication services. U.S.Treasury yields tumbled after April’s
CPI showed headline prices rose at the slowest annual rate since April 2021. Core
inflation remained sticky at +5.5% YoY due to high rent costs, but analysts remained
optimistic that recent evidence of falling shelter expenses should work its way into
the data in the coming months. U.S. producer prices rose less than expected in April
despite an uptick in the services index. The effects of the FOMC’s rapid rate hiking
campaign were evident in other U.S. data. Weekly jobless claims jumped to 264K, the
highest reading since October 2021, while consumer sentiment in May plunged to
six-month lows as debt ceiling concerns added another headwind. The New York
Fed’s consumer expectations survey for April revealed that household spending is
anticipated to decrease significantly over the next year along with a corresponding
decline in the inflation outlook. The Fed’s quarterly Senior Loan Officer Opinion
Survey unsurprisingly exposed tightening credit standards and weak loan demand,
while small business confidence fell to a 10-year nadir in April. Internationally, the
Bank of England raised interest rates by 25bps to 4.5% and struck a hawkish tone by
removing recession possibilities from its economic projections, even though the
British economy grew by just 0.1% in Q1. March GDP slumped 0.3% as poor weather
and inflation hit the services sector. In Europe, investor confidence deteriorated in
May, while a drop in German industrial production spurred recession fears. China’s
data suggested weak domestic demand that may require more stimulus. New bank
loans sank in April while imports contracted sharply. Factory gate deflation
deepened, and consumer prices rose just 0.1% in April, the lowest rate in two years.  [2]

Chart of the Week:

While most U.S. equity indexes are stubbornly stuck under resistance, the Nasdaq-100 Index (NDX) finally broke out to the upside. This year, NDX is up 22%, with the S&P500 only up 7%+. Driving the outperformance is the NYSE FANG Index ($NYFANG), up a whopping 43% YTD. Since NDX is a market cap-weighted index, the 10 stocks in $NYFANG make up just over 50% of its larger cousin’s market value. That means virtually all NDX’s YTD gains can be attributed to $NYFANG. The remaining NDX components are essentially flat, and that  narrow leadership has some investors concerned for the market’s overall health.

 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.

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