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 rallying hard in November and December last year, equity markets have started 2024 negatively. That is, they have sold off sharply with the main global equity index down 1.7% YTD, the Philly SOX index, which has been one of the main YTD underperformers, down 5.8%, while tech, in general, and the mega cap growth stocks, in particular, have all been weak. With that, the S&P500 appears to have failed at its all time highs in January 2022 (for now – see key chart below).
Given that recent weakness, and with SELL signals on some of our medium term indicators (e.g. our ‘fast moving scoring system’), there’s a debate amongst market participants as to whether this is a phase of consolidation/digestion of recent gains; Or are markets rolling over into a renewed bout of weakness?
We have laid out our thoughts in our latest ‘Tactical Asset Allocation’ research (published last week). Please email info@longvieweconomics.com if you would like a copy.
Key events this week are listed below and, most notably, include the US CPI report for December (due on Wednesday). In particular, the recent rise in bond yields (and strong labour market data) are key reasons for a weaker equity market this year. CPI will therefore be watched closely (and will be followed by US PPI on Friday). Elsewhere there are several key Fed speakers (including Bostic, Williams, & Kashkari) while the US earnings season gets going in earnest this week, with the banks reporting on Friday (see below for detail).
(All in London time BST)
Events: Speech by the Fed’s Bostic on the economic outlook (5pm).
Data: German imports & exports (Nov, 7am); EZ retail sales (Nov, 10am).
Earnings: N/A
Events: Speech by the Fed’s Barr on bank regulation (5pm).
Data: US NFIB small business optimism (Dec, 11am); EZ unemployment rate (Nov, 10am).
Earnings: N/A
Events: Speech by the Fed’s Williams on the economic outlook for 2024 (8:15pm).
Data: Chinese FDI, new yuan loans, & money supply (Dec, time tentative); UK BRC retail sales (Dec, 12:01am).
Earnings: N/A
Events: Bank of Korea policy rate decision (time tentative).
Data: US headline & core CPI (Dec, 1:30pm).
Earnings: Delta.
Events: Speech by the Fed’s Kashkari at the Regional Economic Conditions Conference (3pm).
Data: US headline & core PPI (Dec, 1:30pm); Chinese CPI & PPI (Dec, 1:30am).
Earnings: JPMorgan, Bank of America, Wells Fargo, BlackRock, Citigroup, BNY Mellon.
Commodity Fundamentals Report No. 173, 4th January 2024:
“Oil: Uptrend to Resume in 2024”
With oil prices trending lower in recent months, the consensus has turned notably sour. The IEA, for example, now expects the largest supply surpluses since 2022 this year, citing slowing oil demand growth. Likewise, oil sentiment readings recently reached their lowest levels in 2 years (fig 11), whilst the latest Dallas Fed Energy Survey showed that major energy producers and service providers have lowered their oil price forecasts close to the lowest levels since 2021 (fig 12).
The question is whether that bearish consensus is correct. Will a recession and associated slowing global oil demand result in even lower oil prices (i.e. a ‘recession’ scenario)? Conversely, is the consensus now overly bearish, with OPEC+ cuts and ongoing demand growth likely to push the market back into deficit (i.e. a ‘no recession’ scenario)? Or are both scenarios wrong, with a broadly balanced market in 2024 more likely?
Events: Speech by the Fed’s Bostic on the economic outlook (5pm).
Data: New York Fed 1-year inflation expectations (Dec, 4pm); US consumer credit (Nov, 8pm).
Earnings: N/A
Events: Speech by the Fed’s Barr on bank regulation (5pm).
Data: US NFIB small business optimism (Dec, 11am); Canadian building permits (Nov, 1:30pm).
Earnings: Accenture, FedEx.
Events: Speech by the Fed’s Williams on the economic outlook for 2024 (8:15pm).
Data: US MBA weekly mortgage applications (12pm); US wholesale inventories (Nov, 3pm).
Earnings: Micron, General Mills.
Events: Speech by the Fed’s Kashkari at the Regional Economic Conditions Conference (3pm).
Data: US headline & core CPI (Dec, 1:30pm); US weekly jobless claims (1:30pm); US monthly budget statement (Dec, 7pm).
Earnings: Delta.
Events: N/A
Data: US headline & core PPI (Dec, 1:30pm).
Earnings: UnitedHealth, JPMorgan, Bank of America, Wells Fargo, BlackRock, Citigroup, BNY Mellon
Events: N/A
Data: German factory orders (Nov, 7am); German imports & exports (Nov, 7am); EZ Sentix investor confidence (Jan, 9:30am); EZ retail sales (Nov, 10am); EZ European Commission consumer confidence (December final estimate, 10am).
Earnings: N/A
Events: Speech by the ECB’s Villeroy in Paris (5:30pm).
Data: German industrial production (Nov, 7am); Italian unemployment rate (Nov, 9am); EZ unemployment rate (Nov, 10am).
Earnings: N/A
Events: Speech by the ECB’s Guindos in Madrid (8am).
Data: French industrial production (Nov, 7:45am); Italian retail sales (Nov, 9am).
Earnings: N/A
Events: Speeches by the ECB’s Vujcic on monetary policy (9:30am), and Vujcic again at MNI video conference (3:30pm).
Data: Italian industrial production (Nov, 9am).
Earnings: N/A
Events: Speech by the ECB’s Lane in Dublin (12:30pm).
Data: French consumer spending (Nov, 7:45am), French headline & core CPI (December final estimate, 7:45am).
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: BRC retail sales (Dec, 12:01am).
Earnings: J Sainsbury.
Events: N/A
Data: N/A
Earnings: Tesco, Marks & Spencer Group.
Events: N/A
Data: Monthly GDP estimate (Nov, 7am).
Earnings: N/A
Events: N/A
Data: Japanese household spending (Nov, 11:30pm).
Earnings: N/A
Events: N/A
Data: Australian retail sales (Nov, 12:30am); Australian housing data (Nov, 12:30am).
Earnings: N/A
Events: N/A
Data: Australian job openings (Nov, 12:30am); Australian CPI (Nov, 12:30am); Chinese FDI, new yuan loans, & money supply (Dec, time tentative).
Earnings: N/A
Events: Bank of Korea policy rate decision (time tentative).
Data: Australian imports & exports (Nov, 12:30am); Japanese ESRI leading index (November flash estimate, 5am); Japanese bank lending (Dec, 11:50pm).
Earnings: N/A
Events: N/A
Data: Australian home loans value (Nov, 12:30am); Chinese CPI & PPI (Dec, 1:30am).
Earnings: N/A
(Long)View from London, 5th January 2024:
“[x]”
Commodity Fundamentals Report No. 173, 4th January 2024:
“Oil: Uptrend to Resume in 2024”
Tactical Equity Asset Allocation No. 240, 3rd January 2024:
“Stay Tactically OW Equities (albeit risks rising)”
(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”