The Week Ahead

The Week Ahead:

We hope you had a good long weekend but it’s now back to business (almost).

Earnings season kicks off shortly with reports from big banks and financial institutions, including JPMorgan Chase, Wells Fargo, Citigroup, BlackRock, and PNC Financial Services. We’ll also get earnings from Progressive Insurance, Delta Air Lines, and UnitedHealth Group, among others.

We will get an update on UK GDP and the latest inflation reports will become available in the US via the Consumer Price Index and Producer Price index for March.

The Federal Reserve will also release meeting minutes from its most recent policy meeting on Wednesday.

Then on Friday, the Census Bureau will report on March retail sales, providing a key update on consumer spending. Also this week, the International Monetary Fund (IMF) and World Bank will hold their 2023 spring meetings in Washington D.C. starting Monday.

Earnings:

Earnings season begins this week with reports from some of the biggest banks and financial institutions in the U.S. JPMorgan Chase, Wells Fargo, BlackRock, Citigroup, and PNC Financial Services will report their earnings on Friday.

Earnings for S&P 500 companies are projected to have fallen 6.6%, which would mark the largest quarterly decline since the second quarter of 2020, according to FactSet.

Of the companies issuing earnings guidance, 79 have issued negative EPS guidance while just 27 have issued positive guidance.

US inflation

With the annual rate of personal consumption expenditure (PCE) and core PCE continuing to soften on an annual basis, traders will be seeking further evidence in next week’s inflation report.

A softer report likely plays into the weaker dollar theme as traders are once again alert to the possibility of a US recession somewhere along the line.

US retail sales

With renewed recession fears replacing financial meltdown concerns, we could expect a bearish reaction for the US dollar and Wall Street indices should retail sales stumble. Consumers are usually the last to react to a turndown, so if there are fears of a recession on Main Street then in theory consumer related data such as retail sales and household spending should suffer.

Sales are projected to have fallen 0.4% last month, at the same pace as February. They’re projected to rise 4% to 6% this year, totalling $5.13 trillion to $5.23 trillion by the end of 2023, according to a National Retail Federation forecast.

The bulk of that increase will likely come from non-store and online sales, which are projected to rise 10% to 12% to a range of $1.41 trillion to $1.43 trillion.

Rising interest rates, persistently high inflation, and growing concerns about a recession could lead to slower growth compared to 2022, when overall sales rose 7%.

China inflation data (CPI, PPI)

Consumer prices fell to 1% y/y in February, down -1.1 percentage points from January. It depends on how you look as this as to whether this is good. If an export nation such as China is exhibiting lower prices, this is ‘exported deflation’ and places less pressure on prices overseas. And this is also backed up by lower inflation rates across Asia in general. It also means that if prices continue to soften, that Beijing will unleash more stimulus in order to achieve their 2023 goal of GDP ‘around’ 5%, which could instill some risk-on sentiment. But look ahead, what if oil prices continue higher and trigger a second wave of inflation?

It likely means higher rates for longer globally, so we doubt inflation figures will drop of the radar for traders any time soon.

UK GDP

The U.K. economy grew by 0.3% in January, official figures showed last month, exceeding expectations as it continues to fend off what economists see as an inevitable recession.

Economists polled by Reuters had projected a 0.1% monthly increase in GDP. GDP was flat over the three months to the end of January, the Office for National Statistics said.

On Thursday we will see whether the UK economy has continued to grow or whether signs of the ‘inevitable’ recession are more imminent.

Contrary to popular belief the Bank of England recently ruled out the likelihood of a recession in 2023. This surprisingly upbeat forecast is in contrast with most economists (who almost never predict anything positive). Our fingers are crossed that the BoE are right on this occasion and the UK economy proves resilient once again.

Our main concern for the near future is actually the reduction of oil production announced by OPEC. Just as the world is getting its footing again, they have sent oil prices higher. This is unnecessarily inflationary at a time when the world could really do without it.

Economic Calendar

Our market bias at the moment:

Exposure within the TPP strategies is relatively small at the moment.

After a great Q1 on both the BUY and SELL side for many of our strategies, many have taken profits whilst they wait for the next opportunity.

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.

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.

Join the investment revolution.

‍