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:
After a strong rally in the first half of December, US equities have consolidated their gains this past week and are poised at key levels. For the S&P500, that level is the all-time high from late 2021 (4,797 on the cash index). Of interest, the equally weighted S&P500 has also rallied sharply in recent weeks and is trading at/just above its highs from early Feb and late July (see key chart below).
The key question, therefore, is: Will those indices break higher into the New Year? And, if so, which sectors will lead the market? Will it be tech/growth stocks? Or, will other sectors take up leadership?
Of interest, since the rates market started to rapidly price in Fed rate cuts for 2024 (from mid-November), the expensive mega-cap stocks have underperformed the rest of the market. With that, the ‘equally weighted S&P500’ (and other indices like the Russell 2000, i.e. mid-caps) have outpaced the S&P500 and the NASDAQ100. Will that carry on over coming weeks and into January?
Macro data and events, of course, will be relatively light next week. There are, though, several key US data points due in early January, which include: ISM Manufacturing (out on Wednesday 3rd); ADP employment (Thursday 4th); and ISM Services & nonfarm payrolls (Friday 5th).
Please see below for a full list of key data/events due over the next two weeks.
The Most Important Key Data, Events and Earnings out Next Week (w/c 25th December 2023)
(All in London time BST)
Events: Market holidays in all major markets bar China & Japan on account of Christmas Day; speech by the BoJ’s Ueda at Keidanren meeting in Tokyo (time tentative).
Data: Japanese unemployment data (Nov, 11:30pm); Japanese services PPI (Nov, 11:50pm).
Earnings: N/A
Events: Market holidays across Europe, UK & Hong Kong on account of Boxing Day.
Data: US Case-Shiller house prices (Oct, 2pm); Dallas Fed manufacturing activity (Dec, 3:30pm).
Earnings: N/A
Events: N/A
Data: Dallas Fed services activity (Dec, 3:30pm); Chinese industrial profits (Nov, 1:30am); Japanese industrial production (November flash estimate, 11:50pm).
Earnings: N/A
Events: N/A
Data: US wholesale & retail inventories (Nov, 1:30pm).
Earnings: N/A
Events: N/A
Data: Chicago PMI (Dec, 2:45pm); UK Nationwide house prices (Dec, 7am).
Earnings: N/A
The Most Important Key Data, Events and Earnings out the Week After (w/c 1st January 2024)
(All in London time BST)
Events: Market holidays in all major markets on account of New Year’s Day.
Data: South Korean imports & exports (Dec, 12am); Australian CoreLogic house prices (Dec, 1:01pm).
Earnings: N/A
Events: N/A
Data: Chinese Caixin manufacturing PMI (Dec, 1:45am); EZ M3 money supply (Nov, 9am).
Earnings: N/A
Events: N/A
Data: US ISM manufacturing (Dec, 3pm); US JOLTS job openings (3pm).
Earnings: N/A
Events: N/A
Data: US Challenger job cuts (Dec, 12:30pm); US ADP employment change (1:15pm); Chinese Caixin services PMI (Dec, 1:45am).
Earnings: Walgreens Boots Alliance.
Events: N/A
Data: US nonfarm payrolls (Dec, 1:30pm); US ISM services (Dec, 3pm); EZ headline & core CPI (December flash estimate, 10am).
Earnings: Constellation Brands.
Quarterly Asset Allocation No. 56, 21st December 2023:
“Implementing Thematic Bets in Strategic Portfolio a.k.a. Downgrading US Recession Risk”
We are shifting our recession probability from above 50% to below 50%. That is, we have assigned a 65% probability to ‘no US recession in 2024’. As such, and while the possibility of a recession in 2024 is not completely off the table, it’s not our central case. For that reason (and others as outlined below), the risk reward, therefore, favours making changes to our strategic portfolio this quarter. Those changes are laid out below.
The rationale reflects the Fed’s decisive policy shift last week (from ‘higher for longer’, to expecting to loosen in 2024), as well as a number of other factors.
In particular, recessions have historically been driven by a combination of: (i) tight money; (ii) a shock of some form (a bursting bubble, deflating housing market, GFC etc.); and/or (iii) a corporate sector which is overstretched and begins to cut back/retrench.
Week Commencing 25th December 2023
Events: Market holidays in the US & Canada on account of Christmas Day.
Data: N/A
Earnings: N/A
Events: Market holiday in Canada on account of Boxing Day.
Data: Chicago Fed national activity index (Nov, 1:30pm); Philadelphia Fed non-manufacturing activity (Dec, 1:30pm); US FHFA house prices index (Oct, 2pm); US Case-Shiller house prices (Oct, 2pm); Dallas Fed manufacturing activity (Dec, 3:30pm).
Earnings: N/A
Events: N/A
Data: Richmond Fed manufacturing & business conditions (Dec, 3pm); Dallas Fed services activity (Dec, 3:30pm).
Earnings: N/A
Events: N/A
Data: Canadian CFIB business barometer (Dec, 12pm); US wholesale & retail inventories (Nov, 1:30pm); US weekly jobless claims (1:30pm); US pending home sales (3pm).
Earnings: N/A
Events: N/A
Data: Chicago PMI (Dec, 2:45pm).
Earnings: N/A
Week Commencing 1st January 2024
Events: Market Holidays in the US & Canada on account of New Year’s Day.
Data: N/A
Earnings: N/A
Events: N/A
Data: S&P Global manufacturing PMIs for Canada (Dec, 2:30pm) and the US (December final estimate, 2:45pm).
Earnings: N/A
Events: Fed releases minutes from December FOMC meeting (7pm).
Data: US weekly mortgage applications (12pm); US ISM manufacturing (Dec, 3pm); US JOLTS job openings (3pm); US Wards total vehicle sales (Dec).
Earnings: N/A
Events: N/A
Data: US Challenger job cuts (Dec, 12:30pm); US ADP employment change (1:15pm); US weekly jobless claims (1:30pm); US S&P Global Services PMI (December final estimate, 2:45pm).
Earnings: Walgreens Boots Alliance.
Events: N/A
Data: Canadian unemployment data (Dec, 1:30pm); US nonfarm payrolls (Dec, 1:30pm); US unemployment data (Dec, 1:30pm); US ISM services (Dec, 3pm); Canadian Ivey PMI (Dec, 3pm); US durable goods orders (November final estimate (3pm).
Earnings: Constellation Brands.
Week Commencing 25th December 2023
Events: Market holidays across Europe on account of Christmas Day.
Data: N/A
Earnings: N/A
Events: Market holidays across Europe on account of Boxing Day.
Data: N/A
Earnings: N/A
Events: N/A
Data: N/A
Earnings: N/A
Events: N/A
Data: N/A
Earnings: N/A
Events: N/A
Data: N/A
Earnings: N/A
Week Commencing 1st January 2024
Events: Market Holidays across Europe on account of New Year’s Day.
Data: N/A
Earnings: N/A
Events: N/A
Data: HCOB manufacturing PMIs for Italy (8:45am), France (8:50am), Germany (8:55am), and EZ (9am) – all December final estimates bar Italy; EZ M3 money supply (Nov, 9am); Italy new car registrations (Dec, 5pm).
Earnings: N/A
Events: N/A
Data: German unemployment data (Dec, 8:55am).
Earnings: N/A
Events: N/A
Data: French CPI (December flash estimate, 7:45am); HCOB services PMIs for Italy (8:45am), France (8:50am), Germany (8:55am), and EZ (9am) – all December final estimates bar Italy; German CPI (December flash estimate, 1pm).
Earnings: N/A
Events: N/A
Data: German retail sales (Nov, 8am); EZ headline & core CPI (December flash estimate, 10am); EZ PPI (Nov, 10am); Italian CPI (December flash estimate (10am).
Earnings: N/A
Week Commencing 25th December 2023
Events: Market holiday in the UK on account of Christmas Day.
Data: N/A
Earnings: N/A
Events: Market holiday in the UK on account of Boxing Day.
Data: N/A
Earnings: N/A
Events: N/A
Data: N/A
Earnings: N/A
Events: N/A
Data: N/A
Earnings: N/A
Events: N/A
Data: Nationwide house prices (Dec, 7am).
Earnings: N/A
Week Commencing 1st January 2024
Events: Market Holiday in the UK on account of New Year’s Day.
Data: N/A
Earnings: N/A
Events: N/A
Data: BRC shop price index (Dec, 12:01am); S&P Global manufacturing PMI (December final estimate, 9:30am).
Earnings: N/A
Events: N/A
Data: N/A
Earnings: N/A
Events: N/A
Data: Net consumer credit, mortgage approvals & M4 money supply (Nov, 9:30am); CPI expectations (Dec, 9:30am); S&P Global services PMI (December final estimate, 9:30am).
Earnings: N/A
Events: N/A
Data: New car registrations (Dec, 9am); S&P Global construction PMI (Dec, 9:30am).
Earnings: N/A
Week Commencing 25th December 2023
Events: BoJ releases Summary of Opinions from December monetary policy meeting (11:50pm); speech by the BoJ’s Ueda at Keidanren meeting in Tokyo (time tentative); market holidays in all major APAC markets bar China & Japan on account of Christmas Day.
Data: Japanese ESRI leading index (October final estimate, 5am); Japanese unemployment data (Nov, 11:30pm); Japanese services PPI (Nov, 11:50pm).
Earnings: N/A
Events: Market holidays in Australia, New Zealand & Hong Kong on account of Boxing Day.
Data: Japanese machine tool orders (November final estimate, 6am).
Earnings: N/A
Events: N/A
Data: Chinese industrial profits (Nov, 1:30am); South Korean industrial production (Nov, 11pm); Japanese retail sales (Nov, 11:50pm); Japanese industrial production (November flash estimate, 11:50pm).
Earnings: N/A
Events: N/A
Data: N/A
Earnings: N/A
Events: Market holiday in South Korea on account of Korean New Year’s Day.
Data: N/A
Earnings: N/A
Week Commencing 1st January 2024
Events: Market Holiday in all major APAC markets on account of New Year’s Day.
Data: South Korean imports & exports (Dec, 12am); Australian CoreLogic house prices (Dec, 1:01pm); Australian Judo Bank manufacturing PMI (December final estimate, 10pm).
Earnings: N/A
Events: Market Holiday in Japan, South Korea, and New Zealand on account of New Year’s Day bank holidays.
Data: South Korean S&P Global manufacturing PMI (Dec, 12:30am); Chinese Caixin manufacturing PMI (Dec, 1:45am).
Earnings: N/A
Events: Market Holiday in Japan on account of the New Year Holiday.
Data: Indian S&P Global manufacturing PMI (Dec, 5am); Australian Judo Bank services PMI (December final estimate, 10pm).
Earnings: N/A
Events: N/A
Data: Japanese Jibun Bank manufacturing PMI (December final estimate, 12:30am); Chinese Caixin services PMI (Dec, 1:45am); Japanese monetary base (Dec, 11:50pm).
Earnings: N/A
Events: N/A
Data: Japanese Jibun Bank services PMI (December final estimate, 12:30am); Japanese consumer confidence (Dec, 5am); Indian GDP estimate (2024, 12pm).
Earnings: N/A
(Long)View from London, 22nd December 2023:
“2023 Wrap-Up & Latest Update on the Strategic Outlook”
Quarterly Asset Allocation No. 56, 21st December 2023:
“Implementing Thematic Bets in Strategic Portfolio a.k.a. Downgrading US Recession Risk”
Extract from Quarterly Asset Allocation No. 56, 20th December 2023:
“Tech Overstretched: Changing of the Guard”
(Long)View from London, 15th December 2023:
“20 years of Longview”
Extract from Quarterly Asset Allocation No. 56, 14th December 2023:
“China: In a Balance Sheet Recession?”
Commodity Fundamentals Report No. 172, 12th December 2023:
“Natural Gas: Key Risks to European Stockpiles”
Extract from Quarterly Asset Allocation No. 56, 11th December 2023:
“Eurozone: Teetering…”