Jan 24
Market wrap-up - January 23, 2023
Wall Street ended the week a bit better than it started it. Again, market moods were dictated by comments from various local Fed presidents who sent mixed signals throughout the week, so equity markets ended flattish.
Luckily, on Friday, Christopher Waller told us the monetary policy was almost tight enough and said he favors a 25bps hike for the next meeting. Same wording from the Fed of Kansas and Philadelphia who call for a step-by-step approach before being too aggressive on hikes. That was enough for the markets to focus on a half-full glass.
For the technical analysts out there, and there are a lot of them, the S&P 500 even claimed back its 200-day moving average. I’m no TA fan but given that we failed to break through twice last year, it makes this level one of the most-awaited bull signals. Let’s see how long we can stay above that key level.
The same picture on the crypto side or even better, with single green digits was common last week. Bitcoin is leading the way this time and outperforms Ethereum and most of the main coins of the top 20 (except both famous meme coins that are coming back). Now that Ethereum became deflationary again, this might change, but for this to happen, we would need to see a renewed steady activity on the NFT side and it’s probably too early in the cycle for this trend to last.
The picture in Europe was different with ECB members calling for 50bps hikes in the next few meetings, probably boosted by the recent survey in which economists pointed to a better-than-anticipated growth outlook in Europe for 2023. If we can avoid a recession, then the ECB is free to do whatever it takes to fight inflation.
Tech companies are announcing their earnings this week with Microsoft publishing today, and Tesla and Intel will follow by Thursday. Over the past few days, Alphabet already warned they would let 12’000 of the employees go, Gemini will cut 10% of their workforce, and Coinbase was downgraded by the debt rating agency Moody’s. But nothing seems to be enough to stop the market sentiment right now.
Looking at the KWEB, an indicator of how strong Chinese Tech stocks are doing, the 90% rise in the past 3 months still has room to grow and this should have a spillover effect in other equity markets but also in the crypto world.
On top of the earnings, what will be important to watch are the S&P Case-Shiller (US Home Prices), the US consumer sentiment, and other major economic publications. This should help us make up our minds on the magnitude of the upcoming hike planned for the FOMC meeting in 1 week.
Other than that, not much to report, Asia is very quiet because of the New Year. Most markets are closed except Tokyo, Hong Kong will only reopen on Thursday. We will have to wait until then to find out if less restrictive regulations on internet stocks and lighter covid measures will keep fueling growth in the region.
For the time being, unsurprisingly, one of the biggest winners is Copper. The metal is up 12% in the last 2 weeks on hopes for a busier industrial sector if the Chinese economy comes out of the covid crisis stronger and faster than we thought it would.
Happy Lunar New Year!
Johan Thomyris
