The Asset Guidance Group Monday Outlook for the Week Ahead Starting Monday May 22, 2023

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

The debt ceiling deadline will remain at the forefront, with talks having stalled late
last week as President Biden attended the G7 meetings in Japan. On the economic
calendar, the action begins Tuesday with global PMI releases. Most closely
watched will be Germany, which has had a slew of bad data recently, and the U.S.,
where the economy only seems to be gradually losing momentum. On Wednesday,
headline inflation is expected to drop in the UK, but lower energy costs are being
more than offset by soaring food prices. The minutes from the May FOMC ay reveal more detail about how many more rate hikes may be needed.
In a speech last Friday, Chair Powell signaled that he is weighing a pause in June.
Thursday brings the second estimate of Q1 U.S. GDP, which is not expected to
deviate from the disappointing +1.1% first reading, as well as pending home sales.
The Tokyo inflation data for May could provide the Bank of Japan with a nudge
towards normalizing monetary policy. A busy Friday wraps up the week, highlighted
by the U.S. Core PCE Price Index for April. Expectations are flat MoM but forecast
to tick down to +4.4% YoY. Personal spending figures are expected to rise, keeping
inflation fires active.  [1]

Recapping Last Week

Global equity indexes rose on surging technology shares and optimism for a U.S.
debt ceiling resolution. The Nasdaq Composite Index jumped 3%, while the Russell
2000 lifted nearly 2% and the S&P500 gained 1.5%+. Overseas, Germany’s DAX Index closed in on all-time highs, while Japan’s Nikkei 225 maintained its highest levels since 1990. Seven of 11 S&P500 sectors finished positive, led by 4%+ gains in technology as artificial intelligence developments sparked notions of new revenue possibilities.
U.S. Treasury yields spiked, with traders speculating on a potential June rate hike as
economic data showed surprising resiliency. U.S. retail sales returned to growth in April, although less than forecast, and large retailers reported earnings that  reflected steady consumer spending patterns, albeit with a shifting away from big ticket
items. U.S. factory production lifted 1.0% last month as automobile output swelled,
while regional manufacturing surveys revealed mixed outlooks. Homebuilder
sentiment turned positive for the first time since July despite lingering sectoral
challenges, and home construction stocks reached a 16-month high. U.S. housing
starts gained 2.2% in April as existing inventory remained tight. The ongoing effects
of inflation were evident in the New York Fed’s household debt report, where credit
card balances held steady in Q1 instead of their typical decline after the holiday season. Total U.S. household debt balances hit a record high of $17.05 trillion, growing 0.9% from Q4 2022. Internationally, China’s industrial production and retail sales numbers significantly grew MoM in April but missed forecasts, and although the central bank left interest rates unchanged, expectations for easier monetary policy are mounting based on weak credit data and deflation risks. Japan’s Q1 GDP expanded by 1.6%, reversing two consecutive quarters of contraction, and core consumer prices rose 3.4% YoY in April. In Australia, static wage growth and falling employment suggested that the Reserve Bank may have reached the peak of its tightening cycle. Finally, the European Commission raised its inflation outlook, while Eurozone Q1 GDP was confirmed at an anemic +0.1%, fueling stagflation fears.  [2]

Chart of the Week:

Japan’s Nikkei 225 Index Futures (/NKD) surged past their 2021 highs to levels
not seen in over three decades. Lots of good news spurred the rally, now in its sixth consecutive week. GDP expanded for the first time in three quarters, partly due to reduced Covid-19 restrictions spurring increased tourism. Japan also happens to be the largest holder of U.S. Treasury debt at over $1.1T, so  diminished default concerns fueled equity investors. Governor Ueda has also doubled down on dovish monetary policy, for now. The momentum carried the weekly MACD and RSI indicators to their highest points in two years, adding confidence to continued advances. 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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