The Asset Guidance Group Monday Outlook for the Week Ahead Starting Monday May 30, 2023

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

President Biden and Speaker McCarthy reached an agreement in principle on
Saturday to lift the debt ceiling for two years. Although Congressional passage is
not assured before June 5, when the Treasury may not be able to meet its
obligations, investors are likely to breathe a huge sigh of relief. S&P500 Index
futures opened modestly higher on Sunday evening. U.S. markets are closed today
for the Memorial Day holiday, and there are bank holidays in most of Europe and
the UK. This week’s main event is Friday’s U.S. jobs report, one of the last puzzle
pieces to fit in before the June FOMC meeting. The JOLTS and ADP reports will
provide additional color leading into it. The U.S. calendar also includes consumer
confidence and ISM Manufacturing PMI. Overseas, flash CPI estimates for May will
filter in from the Eurozone, while the ECB releases its financial stability review and
minutes from the May meeting. Australia’s consumer inflation release and China’s
PMIs complete the international docket.  [1]

Recapping Last Week

U.S. equities finished a volatile week mixed as technology stocks soared, while broad-based index gains were tempered as stronger-than-expected economic and
inflation data put additional interest rate hikes back in play. The Nasdaq Composite Index rose 2.5%, while the S&P500 gained 0.3% and Russell 2000 was flat. Eight of 11 S&P500 sectors lost ground, with the steepest losses in defensive names, while technology jumped 4.5%+ after Nvidia’s blockbuster earnings report. Crude oil prices managed a small gain even as the U.S. dollar’s recent strength continued. U.S. Treasury yields climbed, with the 2-year note jumping 29bps to 4.56% after April’s Core PCE reading rose 0.4% MoM and 4.7% YoY, slightly above expectations. Despite higher inflation, consumer spending was above forecasts for the month, and odds for a June rate hike stood at 68% as of Friday’s close after being virtually zero just a
few weeks ago. Minutes from the May FOMC meeting indicated significant uncertainty about policy for the coming months, but the tide may be turning towards more tightening with a few key data points remaining before the next rate decision. In other news, U.S. GDPgrowth for Q1 was revised up to 1.3% from the 1.1% initial estimate as a strong labor market supported consumer purchasing power,
while demand for durable goods unexpectedly increased in April. The divergence
between manufacturing and services output widened, with strong demand and labor shortages sending services PMI soaring to 55.1 in May while manufacturing remained in contraction. New home sales increased 4.1% in April, while pending sales
flatlined due to limited inventory and higher mortgage rates. Internationally, the
sharp drop in yearly UK inflation was largely due to base effects as monthly prices
still increased by 1.2% in April. In Europe, the German economy entered a technical
recession as Q1 GDP was revised downward to -0.3%, following a 0.5% shrinkage in
Q4 2022. China’s central bank kept lending rates unchanged, but the sliding yuan boosted expectations for a bank reserve requirement cut to stem capital outflows.
Finally, sticky core inflation in Japan further stoked pressures to modify ultra-loose monetary policy.  [2]

Chart of the Week:

The S&P500 Index (SPX) is up 9.5% so far this year. Although historically Mondays tend to have the worst performance, Tuesdays through Fridays average out to be very similar. This year however, the strongest gains are coming at the end of the week, especially on Fridays. The chart’s vertical lines show the weekend breaks, with some large bullish moves right before them. Of the 9.5% YTD gain in SPX, 7.6% is attributed to Fridays. Including Thursdays, it’s up to 12%, meaning the remaining 60% of trading sessions netted a 2.5% loss. Last year, Wednesdays were the best performing day of the week in a down market. When investors have a positive longer-term outlook, they tend to expect good news over the weekend, like most of 2020 and 2021, leading to better end-of-week performance. 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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