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

A busy week awaits with U.S. inflation figures, updates on China’s worsening economic situation, and the European Central Bank’s next interest rate decision. Wednesday’s U.S. CPI will be top of mind after last week’s stronger-than-expected services sector data fueled concerns of sticky inflation and thus a Fed willing to tolerate higher-for-longer interest rates. Prospects for above-trend growth should remain a thorn in equity bulls’ sides. Additionally, the ongoing selloff in U.S. Treasuries will have global investors gauging results of the 10- and 30-year auctions mid-week. 
August Retail sales will arrive Thursday and may reflect increasing pricing pressures on U.S. consumers. The domestic agenda wraps up Friday with consumer sentiment, industrial production, and the New York region’s manufacturing survey. Overseas, the ECB faces one of its more uncertain rate decisions yet on Thursday, as inflation slowed in August but price risks remain skewed to the upside. Meanwhile, business conditions are deteriorating in Germany, the
region’s largest economy. China releases industrial production and retail sales numbers as the country struggles with weak demand at home and from abroad. Other international announcements include the UK’s monthly GDP and employment updates, Eurozone economic sentiment, and Australia’s business confidence and jobs data. [1]

Recapping Last Week

Rising energy prices and better-than-expected economic data worried investors about the future path of interest rates, sending U.S. equity indexes lower for the week. The Russell 2000 Index slumped 3.6%, while the Nasdaq Composite dropped nearly 2% and S&P500 shed 1.3%. Nine of
11 S&P500 sectors lost ground, with basic materials and industrials sliding 2-3%. Apple tumbled 6%, weighing on the technology sector after reports that China banned iPhone use for government workers and Chinese firm Huawei released a new competitive smartphone. Crude oil futures rose again, now up 24% since the start of July, as Saudi Arabia and Russia extended their production cuts through year-end. Strikes at Australian natural gas facilities sent European prices sharply higher, prompting global supply squeeze fears. Falling energy prices had been the biggest contributor to easing global inflation this year, and a resurgence could keep interest rates higher for longer. U.S. Treasury yields and the dollar climbed even as comments from several FOMC policymakers indicated that further hikes this year may not be necessary. In other news, U.S. services activity expanded more than forecast in August, with increases in both new orders and prices paid. Unit labor costs were revised higher for Q2, but the Atlanta Fed Wage Growth Tracker fell from 5.7% to 5.3%, indicating falling but still stubbornly high nominal levels. The labor
market remained tight, with weekly jobless claims falling to a seven-month low. The U.S. trade deficit continued to normalize after pandemic-related disruptions, and early estimates suggested that net exports will provide a modest boost to Q3 GDP growth. Internationally, China reported
another decline in imports and exports for August as demand for goods fades, while services
activity expanded at the slowest pace in eight months. Central banks in Australia and Canada kept interest rates steady but vowed to remain vigilant on inflation. In Europe, Germany’s manufacturing struggles deepened in July, with factory orders and industrial production falling on
sluggish output and high prices. Eurozone retail sales declined as consumers cut back on fuel purchases, while investor confidence sank to -21.5 in September. [2]

Chart of the Week:

After consolidating for nine months, Crude Oil Futures (/CL) have mustered enough strength the past two weeks for an upside technical breakout. Oil prices teased a similar breakout last month but dipped back into the range before finding technical support near the important 50- and 200-day exponential moving averages (EMA). The bounce from that support spurred a 13% rally to nine-month highs, triggering a “Golden Cross” with the 50-day EMA rising above the 200-day. In addition to Saudi Arabian and Russian production cuts, oil supplies may be further restricted by a 38% MoM drop in Venezuela’s exports along with a 20.9% MoM surge in Chinese imports despite their economic woes. A fire at a Louisiana refinery doesn’t help matters in the U.S. This price advance pulled the RSI into overbought territory for only the third time this year, although that appeared to be easing late last week. The MACD is still positive but has not made a new high with price, setting up a potential bearish divergence. Crude oil may be stretched in the short-term, but a bullish trend may persist based on fundamental and technical factors.   Click here to view chart. [3]

Sources: [1] [2] [3] schwabadvisorservices@schwab.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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