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60 Second Snapshot 23rd January

23 January 2023

 

 

LAST WEEK IN 30 SECONDS...

Earnings continue to flood into the market this week. The big tech stocks will be in focus with Microsoft up first on the 24th. Just last week the software company announced they will cut 10,000 jobs, 5% of their global workforce as market headwinds persist. Following that, Tesla will post their Q4 earnings on the 25th. Tesla’s stock had a torrid 2022 and recently missed order targets in its Asian business. And on the 27th one of the world’s largest oil producer, Chevron will post their Q4 earnings. Analysts are confident of strong earnings after the rise in oil prices throughout last year.

From a macro perspective, attention this week will stay on US markets. Inflation data continues to be closely monitored in particular at the core level. On the 27th the core personal expenditure price index will be released. The index measures the prices paid by domestic consumers in the US excluding energy and food. This measure is often used by the Federal Reserve as the key indicator for core inflation.

 

LAST WEEK IN 30 SECONDS...

The week ahead sees a raft of earnings announcements with over 4,000 companies providing market updates on earnings and outlook. These include a number of mega cap companies who have lead the market recovery including Amazon, Google and Mastercard.

The US Federal Reserve provides a policy statement update on Wednesday as markets look for further reassurance to dissipate agitation given the persistence of COVID-19 and intensifying political tensions. The week ahead also sees European Gross Domestic Product (GDP) releases and German Retail Sales updates on Friday. Markets will also look for improvements in US jobless claims which rose last week given further lockdowns across US states.

 

GLOBAL RISK APPETITIE INDICATOR TO PULL BACK?

The start of year rally in markets is already stalling, and there is a growing risk now that markets are beginning to focus on weaker growth as opposed to the somewhat better inflation outlook. A key indicator in this regard is our risk appetite index, which measures whether investors globally are moving capital towards riskier or safer assets. As the chart below shows, our risk appetite index has hit a local high - indeed the last few times it hit such a level, equities sold off. In that sense, it suggests that safer than riskier assets may perform in weeks ahead. During much of 2022, bond prices and equities fell as inflation rose, but the correlation between them is shifting, raising the prospect that bonds can perform while equities stall. While this is something of a more tactical indicator, the broader picture from our investment process also supports a cautious outlook.