The Week Ahead

The Week Ahead:

Good morning and welcome to another week.

Markets have got off to a good start so far this year with nearly all indices rising in the fortnight. This is contrary to most wall street predictions but then as a client of The Portfolio Platform you’re well aware that 2 weeks is not a long time in the markets and it wouldn’t take much to rock the boat.

Many of our traders are now short or flat so it will be interesting to see if the optimism continues, or if inflation and interest rates keep rising.

After two years of pandemic disruption, the World Economic Forum is back in its wintry Alpine setting. But the makeup of the billionaire guest list is decidedly different, reflecting the global upheaval that’s reshaped fortunes and shifted centres of power amid war, disease and surging inflation.

Asian stocks held steady as the new week began, but a holiday in the US means that overall market activity will remain circumscribed.

Japanese stocks came under pressure as investors looked towards the next Bank of Japan meeting, worrying that the bank may look to scale back some of its stimulus efforts even as it fights a wave of selling by bond investors which has driven up yields.

Earnings season gathers pace during the coming week, as more banks release their reports, while other sectors such as tech and airlines move into focus.

Netflix, American Airlines and the banks dominate in the US while in the UK the flood of Christmas trading statements continues.

In economic data we have Chinese GDP, UK consumer price index (CPI), the German ZEW reading and a rate decision from the Bank of Japan (BoJ).

With US markets closed today the main event will be a speech by BoE governor Andrew Bailey, at 3pm this afternoon.

Economic data

It will be a busy run of data from China, the UK and the US this week including inflation figures, retail sales and the Fed’s Beige Book on the economic outlook.

The European Central Bank will publish the minutes of its December meeting on Thursday and various central bankers will be discussing regional and global economics at Davos.

The UK inflation rate will be updated on Wednesday. The outlook is not good, particularly after recent comments by Bank of England chief economist Huw Pill. Ken Murphy, chief executive of the UK’s largest food retailer Tesco, even warned that UK inflation could climb further. Last month’s release showed that the cost of living as defined by the consumer price index (CPI) was 10.7 per cent in November, down from 11.1 per cent in October.

Companies

We are in the thick of the first earnings season of 2023 and a large selection of companies are due to report, particularly from Europe and (when Wall Street returns from the Martin Luther King Day break) the US.

Online food ordering services Just Eat Takeaway and Deliveroo will update investors on their festive sales on Wednesday and Thursday respectively. Both are under pressure to deliver improved profitability. The end of lockdown was not good for the food ordering apps as customers chose to return to restaurants.

The question now is whether recession will help these companies — as more people get takeaways instead of eating out — or hit them further as customers return reluctantly to their own kitchens.

Efforts to increase sales of groceries, through partnerships with supermarkets and convenience apps such as Getir, may give Deliveroo and JET a slice of the home-cooking market too.

Last year was one to forget for Ocado Retail. The online supermarket, jointly owned by Ocado — which reports numbers on Tuesday — and Marks and Spencer, parted company with chief executive Melanie Smith and warned on profits several times. Its sales are expected to fall for the first time in its history.

At its last update in September, Ocado said it expected strong growth in customers and sales growth of about 5 per cent for the fourth quarter. That would be similar to the growth posted last week by Tesco and J Sainsbury, after British shoppers splashed out for the first Christmas in two years not to be disrupted by Covid-19.

US airlines are reporting fourth-quarter and full-year earnings as public attention focuses on technical glitches at low-cost carrier Southwest Airlines and the country’s top aviation regulator that caused high-profile meltdowns.

United Airlines will report on Wednesday. Expect chief executive officer Scott Kirby to have a few tart words for the US Federal Aviation Administration, which grounded planes for two hours on Wednesday when a damaged database file caused a safety system to fail. He said over the summer that the agency needed more air traffic controllers.

Key economic and company reports

Monday

·                India, December wholesale price index (WPI) inflation rate data

·                Results: Ashmore Q2 trading update, Rio Tinto Q4 operations, UMC 4Q

Tuesday

·                Canada, December consumer price index (CPI) inflation rate data

·                China, December retail sales and industrial production figures

·                China, Q4 GDP figures

·                Germany, December harmonised index of consumer prices (HICP) and CPI inflation rate data

·                Germany, ZEW economic sentiment survey

·                UK, monthly labour market statistics

·                Results: Alliance Pharma FY trading update, Citizens Financial Group Q4, Crest Nicholson FY, Experian Q3 trading update, Goldman Sachs Q4, Hays Q2 trading update, Morgan Stanley Q4, Lindt & Sprungli sales update, Ocado Q4 trading statement, THG Q4 trading update, Wise Q3 trading update

Wednesday

·                EU, final core December HICP inflation rate data

·                Japan, Bank of Japan rate-setting meeting announcement

·                UK, December CPI and producer price index (PPI) inflation rate data

·                UK, November house price inflation index

·                US, December retail sales figures

·                US, December PPI inflation rate data

·                US, Federal Reserve issues its Beige Book on economic conditions

·                US, December industrial production figures

·                Results: Burberry Q3 trading update, Charles Schwab Q4, Currys trading update, JB Hunt Transport Services Q4, Just Eat Takeaway Q4 trading update, Pearson trading update, Rathbones Q4 trading update, United Airlines Q4, WHSmith Christmas trading statement

Thursday

·                EU, ECB’s December monetary policy committee meeting minutes published

·                UK, RICS house price survey

·                Results: Boohoo trading statement, Deliveroo Q4 trading update, Netflix Q4, Northern Trust Q4, Premier Foods Q3 trading update, Procter & Gamble Q3, Sage Q1 trading update, Workspace Group Q3 trading update

Friday

·                China, monetary policy rate-setting announcement

·                Germany, December PPI inflation rate data

·                Japan, December CPI inflation rate data (AM local time)

·                UK, GfK consumer confidence survey

·                UK, December trade data

·                Results: Close Brothers trading update, Schlumberger Q4, State Street Q4

Our market bias at the moment:

After a solid end to 2022, and a particularly pleasing Q4- our traders and trading teams will be keen to start 2023 on the front foot.

Week one was an excellent one as the majority of our traders sat on the BUY side of the market. Last week was different, the markets continued to rally, but our traders liquidated profits, went flat, and some initiated short sell positions in the market place.

RIght now on our platform, our strategies are predominantly on the SELL side of the markets.

Another bold call, and will it be one that pays off?

What was really interesting over the last quarter was how our traders evolved from 'buying the market dip', to 'short selling' many of the global indices, before finally evolving into a BUY position to close out the year.

What will Q1 bring? More of the same?

Looking further ahead, what should we expect in 2023?

One thing we do know is that one year is a long time in the markets, and if last year is anything to go by- expect the unexpected.

Whether global markets bounce back this year, or trade in a range- our traders are tasked with achieving a minimum of 2 x their market benchmark per annum.

Here is to a great year in 2023.


If you currently have an underperforming portfolio elsewhere, or are holding cash whilst waiting for an entry point- contact our team for a FREE market consultation.

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