Market wrap-up - January 30, 2023

Another strong green week this year.

We’re still in the middle of the earning season and despite bad news from tech giants like Microsoft or Intel, nothing seems to be able to stop the rise of risk-on assets. In the altcoin space, we even saw some impressive high-double to triple-digits weekly candles. Tech stocks obviously also benefited from the buying frenzy with Nasdaq closing its 4th consecutive positive week this year, while the pharma sector was lagging as defensive/dividend stocks are losing their shine.

Markets expect Jerome Powell to announce a modest 25bps move this week, which would take us to 4.75% max. That would probably be enough to push risky assets even higher. But let’s also be cautious and keep in mind that the Fed is in a black-out period and therefore cannot do anything to tame the ongoing glass-half-full mode. Therefore, Wednesday night will definitely be the most awaited time of the week.

In the meantime, several US indices broke above their 200-DMA levels and managed to sustain that level so far. We might even witness a golden cross in the coming days or weeks (when the 50-DMA crosses the 200 on the way up), a strong bull signals for TA lovers. This starts to feel like mid-2020, on both TradFi and crypto markets.

January could go down as a turnaround month, at least for the bulls, if nothing changes. But that’s a big if.

Also, the Fed can set the tone, but the US are not the leaders on the equity market this year, Europe and China are. Hong Kong is still dominating the market, and this might continue as the Chinese Central Bank (PBOC) has extended several minatory policy tools to support green tech and logistics companies. Christine Lagarde is also set to raise rates on Feb 2nd and her speech will be key to pave the way for further gains on equities after the main European index already reached +9% in less than a month.

But please, please, please, do not think we are out of the woods yet and trade with caution. As much as I enjoy huge green candles on any market, keep in mind that some data still points to softer consumer confidence and that many market participants are still pricing a probability of US recession between 30 and 40%. That doesn’t make it a core scenario but it’s far too big to be ignored. And I don’t know who still needs to hear this but do not go all in. Diversifying and keep dry powder is never a bad idea.

On top of that, we have a heavy week ahead in terms of data. We have the Fed on Feb 1st, the OPEC meeting and lots of company earnings. In the US, we will have Amazon, Apple, Alphabet, Meta, Exxon Mobil, Starbucks, McDonald’s, Caterpillar, Merck and others. In Europe, Novo Nordisk, Novartis, Roche, Shell et Sanofi…With so many big names reporting their results, we should have a better picture of what the corporate world expects for the economic outlook.

Job reports at the end of this week will also be a good gauge about how resilient the US economy is after the rate hikes.

Johan Thomyris

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