The State of Markets
A brief review of all key upcoming events across the major regions of the globe & an overview of key recent market trends.
The State of Markets:
Having traded broadly sideways from early to mid-March, the S&P500 broke out to the upside last week. That was on the back of Wednesday’s Fed decision, which was perceived as dovish. Of note, the three 2024 rate cuts remained in place in the dot plots; the Fed’s rate expectations for 2025 were reduced (slightly); while, more importantly, Powell highlighted the Fed’s goal to start tapering QT ‘soon’. QT is a drain on market liquidity. Ending the program (or at least slowing it) is therefore a relative positive for the liquidity environment. Reflecting all of that, US 2-year government bond yields fell by 13bps over the week, while 10 year yields also closed notably lower (by 9bps).
Of interest, and while dovish Fed signalling was positive for the S&P500 and other key leadership (and ‘tech heavy’) indices, the rally was relatively broad based. The equally weighted S&P500, for example, made new highs on Thursday (see key chart below), while US small and mid-cap stocks also delivered strong gains. The key question, therefore, is: How much more upside is there in US equities over coming days and weeks? For detailed analysis of that question, see next week’s ‘Longview Tactical Alert’ publication (due out early in the week).
Speeches by various Fed members this coming week will be watched closely in that respect (i.e. as they attempt to ‘fine tune’ the Fed’s monetary policy messaging). Key speakers include Bostic (Monday); Waller at the Economic Club of New York (Wednesday); and Powell (on Friday). Key macro data releases are multiple and include housing data in the US (new & pending home sales), and PCE inflation due on Friday. Please see below for a full list of key data & events.
Fig A: Equally weighted S&P500 index, with its 50 & 200 day moving averages
(All in London time BST)
Events: N/A
Data: US new home sales (Feb, 2pm); UK CBI retail sales survey (Mar, 11am).
Earnings: N/A
Events: N/A
Data: US durable goods orders (Feb, 12:30pm); US Conference Board consumer confidence (Mar, 2pm).
Earnings: PetroChina, BYD Auto.
Events: Speech by Governor Waller at the Economic Club of New York on the Economic Outlook (10pm).
Data: Eurozone European Commission consumer, industrial, services & economic confidence (Mar, 10am).
Earnings: ICBC.
Events: N/A
Data: Eurozone M3 money supply (Feb, 9am); US Michigan sentiment (March first estimate, 2pm); US Chicago PMI (Mar, 1:45pm).
Earnings: China Construction Bank, Agricultural Bank China, Bank of China.
Events: Powell in Discussion with Kai Ryssdal at the Federal Reserve Bank of San Francisco Macroeconomics and Monetary Policy Conference (3:30pm); Public Holiday in Europe & US Market Holiday.
Data: US personal income & spending including headline & core PCE inflation (Feb, 12:30pm).
Earnings: N/A
Extract from Quarterly Asset Allocation No. 57, 20th March 2024:
“Positioning Ahead of a Summer SELL-off”
Risk assets have performed well in recent months. Global equities are up 25% since their October low; several country indices have made new record highs; and credit spreads/other risk premia have tightened (in some cases dramatically, e.g. see BTP spreads over Bunds). Elsewhere volatility across certain major asset classes has fallen/trended lower (e.g. with FX vol falling to a two year low).
Unsurprisingly, therefore, consensus thinking in markets is reasonably bullish. There’s no longer talk of a US/global recession, cash levels in portfolios have fallen to low levels, and sentiment towards equities has risen to a 20 year high.
Events: Fed's Bostic participates in a moderated conversation on "Household Finance" at the Georgia Institute of Technology (12:25pm); speech by Fed’s Cook (3:30pm).
Data: US Chicago Fed national activity index (Feb, 2pm); US new home sales (Feb, 2pm); US Dallas Fed manufacturing activity (Mar, 2:30pm).
Earnings: N/A
Events: Speech by Bank of Canada’s Rogers (12:15pm).
Data: US Philadelphia Fed non-manufacturing activity (Mar, 12:30pm); US durable goods orders (Feb, 12:30pm); US Case-Shiller house prices (Jan, 1pm); US FHFA house price index (Jan, 1pm); US Conference Board consumer confidence (Mar, 2pm); US Richmond Fed manufacturing & business conditions (Mar, 2pm); US Dallas Fed services activity (Mar, 2:30pm).
Earnings: N/A
Events: Speech by Governor Waller at the Economic Club of New York on the Economic Outlook (10pm).
Data: N/A
Earnings: Cintas, Paychex.
Events: N/A
Data: Canadian CFIB business barometer (Mar, 11am); Canadian GDP (Jan, 12:30pm); US GDP (Q4 third & final estimate, 12:30pm); US weekly jobless claims (Mar, 12:30pm); US Chicago PMI (Mar, 13:45); US pending home sales (Feb, 2pm); US Michigan sentiment (March first estimate, 2pm); US Kansas City Fed manufacturing activity (Mar, 3pm).
Earnings: N/A
Events: Powell in Discussion with Kai Ryssdal At the Federal Reserve Bank of San Francisco Macroeconomics and Monetary Policy Conference (3:30pm).
Data: US personal income & spending including headline & core PCE inflation (Feb, 12:30pm); US goods trade balance (Feb, 12:30pm); US retail & wholesale inventories (Feb; 12:30pm); US Kansas City Fed services activity (Mar, 3pm).
Earnings: N/A
Events: Speech by ECB's Holzmann (10:30am).
Data: N/A
Earnings: N/A
Events: N/A
Data: German GfK consumer confidence (Apr, 7am).
Earnings: N/A
Events: Speech by ECB’s Cipollone (9am).
Data: French consumer confidence (Mar, 7:45); Eurozone European Commission consumer, industrial, services & economic confidence (Mar, 10am).
Earnings: N/A
Events: Speech by ECB’s Villeroy (5:30pm).
Data: German retail sales (Feb, 7am); German unemployment rate (Mar, 8:55am); Eurozone M3 money supply plus monthly households/corporate loan growth (Feb, 9am); Italian consumer & manufacturing confidence (Mar, 9am); Italian PPI (Feb, 11am).
Earnings: H&M.
Events: N/A
Data: French headline & core CPI (Mar, 7:45am); French PPI (Feb, 7:45am); French consumer spending (Feb, 7:45am); Italian headline & core CPI (Mar, 10am).
Earnings: N/A
Events: Speech by BOE’s Catherine Mann (2:15pm).
Data: UK CBI retail sales survey (Mar, 11am).
Earnings: N/A
Events: N/A
Data: N/A
Earnings: Flutter Entertainment
Events: BOE financial policy committee minutes (10:30am).
Data: UK Lloyds business barometer (Mar, 12:01am).
Earnings: N/A
Events: N/A
Data: UK GDP (Q4 final estimate, 7am) including private consumption, government spending, business investment & current account balance (Q4, 7am).
Earnings: N/A
Events: N/A
Data: N/A
Earnings: N/A
Events: N/A
Data: Japanese ESRI leading indicator (January first estimate, 5am); Japanese Jibun Bank service sector PMI (Feb, 11:50pm).
Earnings: N/A
Events: N/A
Data: Japanese machine tool orders (February first estimate, 6am); Australian Westpac leading indicators (Feb, 11:30pm).
Earnings: PetroChina, BYD Auto, China Telecom.
Events: Speech by BOJ’s Tamura in Aomori (1am); BOJ summary of opinions at the March monetary policy meeting (11:50pm).
Data: Australian headline CPI (Feb, 12:30am); Chinese industrial profits (Feb, 1:30am).
Earnings: ICBC, China Life Insurance, Bank of Communications.
Events: N/A
Data: Australian consumer inflation expectation (Mar, 12am); Australian retail sales (Feb, 12:30am); Australian job openings (Feb, 12:30am); Australian private sector credit (Feb, 12:30am); Japanese jobless rate (Feb, 11:30pm); Japanese retail sales (Feb, 11:50pm); Japanese industrial production (Feb, 11:50pm).
Earnings: China Construction Bank, Agricultural Bank China, Bank of China, Postal Savings Bank, Midea Group.
Events: N/A
Data: Japanese housing data (Feb, 5am).
Earnings: Industrial Bank.
Longview on Friday, 22nd March 2024:
“Tactical & Strategic Asset Allocation Update”
Monthly Commodity Update, 21st March 2024:
“Oil & Aluminium Update: The Bull Case”
Quarterly Asset Allocation No. 57, 20th March 2024:
“Positioning Ahead of a Summer SELL-off”
Longview Letter No. 143, 18th March 2024:
“China: Three Challenging Structural Themes”
Longview on Friday, 15th March 2024:
“Equities: The Worry List”
Quarterly Asset Allocation No. 57, 14th March 2024:
“How Much is the US in a Bubble?”
Quarterly Asset Allocation No. 57, 12th March 2024:
“China: Economy Bouncing (but structurally impaired)”