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Global Market – Soft landing of US Economy likely

Global Market- Soft landing of US Economy likely

This week, we will discuss the outcome of all 3 central bank ‘s and their comment on future guidance.  We will also discuss US Jobs data.  We see central bank ‘s and market are preparing in for soft landing.  Central banks continues its monitory tightening policy while key data continue to remain mix with last quarter US GDP data came at 2.90% growth.

US Fed meeting outcome on 1-Feb-23

• US Fed raises rates by 25-bps to 4.50% – 4.75%.
• US Fed chair Jerome Powell: couple more rate hikes expected.
• Fed futures still sees price cut this year, median forecast for 2023 @ 4.486%.

US Economic data – this week

• ADP non-farm employment change: Actual @ 106k Vs estimate @ 176k, weak data
• ISM manufacturing PMI: Actual @ 47.4 Vs estimate @ 48, weak data.
• JOLTS Jobs openings: Actual @ 11.01 M Vs estimate @ 10.28M, strong data.
• Average hourly earnings: Actual @ 0.3% Vs estimate @ 0.30%, in-line with estimate.
• Non-farm employment change: Actual @ 517k Vs estimate @ 196k, very strong data.
• Unemployment change: Actual @ 3.4% Vs estimate @ 3.6%, very strong data.
• ISM Services PMI: Actual @ 55.2 Vs estimate @ 50.50, strong data.

Equichain Wealth Advisors: Market View & Opinion

This week was very busy as there were 3 key central banks, most of the meeting outcome was in-line with market expectation and commentary was also in-line with expectation.  Some US economic data were soft where as some economic data came in strong.  

Soft landing: inflation to cool-off with very minimum economic pain.  Recession could be mild without any major impact of jobs, economic and corporate earnings.

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Global market -Soft landing of US Economy likely.pdf
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Global Market – US Fed, BOE & ECB meeting and Bank of Japan

Global Market- US Fed, BOE & ECB meeting & Bank of Japan

This week we will discuss this week as next week will be very busy for as US Fed meeting on 1-Feb-23, Bank of England & European Central Bank meeting on 2-Feb-23.  We will also discuss how monitory policy by Bank of Japan is framing which is contradictory to its previous policy, inflation data and challenge for global economy.

US Fed meeting outcome on 1-Feb-23

• US Fed is expected to increase rate by 25-bps on 1-Feb-23 with over 99% probability as per Fed fund rate monitor tool.
• Next US Fed meeting on 22-Mar-23 is also factoring 25-bps rate hike, commentary by US Fed chair on 1-Feb-23 will be key to watch out for.

Bank of England outcome on 2-Feb-23

• Bank of England is expected to increase rate by 50-bps on 2-Feb-23.
• Latest inflation figures @ 9.2% for December 2022 released on 18-Jan-23.

European Central Bank on 2-Feb-23

• ECB is expected to increase rate by 50-bps on 2-Feb-23.
• Latest Euro zone inflation came at 9.2% for December, slowdown from 10.1% in November 2022.

Bank of Japan monitory policy at critical stage.

• Latest inflation from Japan as on 27-Jan-23 came at 4.3% Vs expectation of 4.2%.
• Bank of Japan continues to buy around 100% JGB securities which are illiquid and now BOJ is biggest holder of JGB securities.

Equichain Wealth Advisors: Market View & Opinion

In our earlier article we have mentioned global central banks obsession to bring inflation at 2% will come with some pain on economic.  We don’t expect surprise on policy front but commentary will be key to watch out for, we expect comments by US Fed chair Jerome Powell and ECB president Christine Lagarde will be watched closely.  

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Global market -US Fed, BOE & ECB meeting & Bank of Japan.pdf
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Global Market – Bank of Japan, US Economic data & Gold

Global Market- Bank of Japan, US Economic data & GOLD

This week we will discuss Bank of Japan policy, how US Corporate earnings failed to boost the market sentiment and how weak US economic data surprisingly weaken the sentiment and market corrected.  Earlier, strong US economic data would trigger correction in risk-on asset classes a weak economic data would boost sentiment in assets classes.  

Bank of Japan – Change in monitory policy stance

• Bank of Japan maintain ultra-low interest rate policy, kept rate unchanged at -0.1%.
• BOJ: Large scale bond buying to continue as an when needed and maintain yield curve at 0.0%.
• BOJ commit to maintain yield curve control against market expectation of change in policy after last month’s policy decision to increase upper end of yield curve from 0.25% to 0.50%.

US Economic data

In recent months we have seen that market react positively on weak economic data and market turn negative on strong economic data, but on Wednesday market reacted negatively to below estimate PPI & Retail sales data.  This is notable change ahead of next US Fed meeting on 1-Feb-23.

Gold @ $1930

In our article two weeks ago, we have mentioned how global central banks are adding gold to its forex reserve which could also be one of the positive triggers.  In case of any weakening economy or change in monitory policy.  Gold could also be potential beneficiary of de-dollarization in international trade.  We see Gold currently placed in win-win situation.

Equichain Wealth Advisors: Market View & Opinion

We remain optimistic but would turn cautious as corporate earnings so far failed to cheer the market.  Jobs cut announcement continue by big tech companies continues, today Google announce to cut 12000 jobs globally as tech layoffs deepen.  Next week US economic data to watch out for will be Advance GDP q/q on 26-Jan & Core PCE price index m/m on 27-Jan-23.  


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Global market -Bank of Japan, US Economic data & Gold.pdf
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Global Market – Update this week & Gold in Win-Win situation?

Global Market- updates this week & Gold in Win-Win situation?

This week we will cover US economic data, Japan ‘s continuous bond buying to support yield and China reopening fail to cheer the commodity market and European inflation number back to single digit.  We will also discuss how gold could in a win-win situation in near term.

1) U.S. Economic data – this week
2) Bank of Japan – 4 rounds of unscheduled bond buying after raising bond yield tolerance from 0.25% to 0.50%.
3) China re-opening from 8-Jan-23
4) EURO Zone inflation back in single digit: December reading @ 9.2%
5) Gold @ $1867 – Win-Win situation?

Equichain Wealth Advisors: Market View & Opinion

Global market has entered into some kind of loop as we define them and the way it reacts to US economic data.

• Market reacts downward to weak economic data on recession fear and slowdown in earnings growth.  
• Market reacts downward to strong economic data on fear that US Fed will raise interest rate further.

Upcoming economic data and quarterly result season starting from next week will provide important cues and market will show decisive direction by 1st week of February 2023 as next round of central banks meeting scheduled starts with US Fed meeting outcome on 1-Feb-23.

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Global market -Updates this week & Gold in Win-Win situation?.pdf
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Global Market – Question of 2022 – Will get answers in 2023 ?

Global Market- Questions of 2022 – will get Answers in 2023?

This week we will discuss some of the key question which 2022 has left unanswered, so can market expect answer in 2023?   Year 2022 started with mutated expectation as 2021 delivered one of the best years for equity market in recent history.  Year 2022 belong to change in monitory policy by global central banks, Russia – Ukraine crisis and inflation concern.  

This are some of the questions of 2022 – Can we expect answer in 2023?

1) Will US Fed pause / Pivot in February / March or May 2023 meeting?
2) Will Russia – Ukraine crisis ends or escalate further?
3) Worst of inflation is over?  Supply chain issue & Commodity price issue are over?
4) Gold for 2022 is flat – Will Gold outperform in 2023?

Equichain Wealth Advisors: Market View & Opinion

We expect majority of this question will be answered in 1st quarter of 2023 or latest by 2nd quarter of 2023.   All these events are inter-connected and policy by government & their central banks will decide future.

We expect 1st half that is Jan to June 2023 to be volatile and 2nd half of 2023 that is July to December 2023 to give clear and positive trend.  We expect calendar year 2023 to net positive for Equity market.

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Global market -Bank of Japan policy and China ‘s COVID emergency.pdf
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Global Market – Bank of Japan policy and China COVID emergency

This week we will discuss the change in policy by Bank of Japan and fresh concern in China over rising number of COVID cases and its potential impact of global supply chain and economic growth.  Global economy which was returning to some path of certainty hit by another round of uncertainty.

Key points from Bank of Japan policy outcome

• Global inflation impacting Japanese inflation numbers.
• Change in policy allowing – allowing the yield curve to rise – will encourage capital to remain in Japan.
• Japan has been net exporter of capital since interest rate in Japan in negative, Japan has been source of cheap money globally.
• Japanese YEN has appreciated post policy outcome of Bank of Japan.

China ‘s COVID emergency

The situation in China continue to remain at alarming level as COVID spread continue to increase.  News from China remains uncertain and selective for the world to understand the ground really very well.  

Equichain Wealth Advisors: Market View & Opinion

We have seen term “Carry trade unwinding” where money is taken from BOJ at almost zero interest and invested in secured bond of developed countries, which is earning them risk-free return on their investment with currency risk which will hedge in forex market.

We believe, change in Japan ‘s monitory policy is a serious concern which could play out its impact in next 1 – 4 months as last source of cheap money which is Bank of Japan is now drying.  

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Global market -Bank of Japan policy and China ‘s COVID emergency.pdf
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Global Market – US Fed, BOE and ECB meeting – Key takeaways

Global Market- US Fed, BOE & ECB meeting – Key takeaways

US Fed chair Jerome Powell refrain for making any commitment on pause or pivot.

This week we will discus key takeaways from 3 major central banks meeting, US Fed, Bank Of England – BOE and European Central Bank – ECB.   Recent rally started after US Fed chair Jerome Powell speech 30-Nov-22 and soft US Economic data which followed after this speech.

US Fed meeting 13 – 14 December 2022 – Key points

• US Fed increase rate by 50-bps to 4.25% – 4.50% – In line with market expectation.
• Core inflation forecast increase to 4.80% from earlier 4.50% in September 2022 meeting
• Median forecast for 2023 raised to 5.1% up 50-bps from September 2022 meeting.

BOE – Bank of England meeting outcome on 15-Dec-22

• BOE raised rate by 50-bps to 3.50% – 9th increase this year.
• BOE MPC divides 3 ways on interest rate hike, 6 members for 50-bps, 1 for 75-bps hike & 2 members for unchanged.
• BOE MPC repeats willingness to act forcefully if needed.

ECB – European central Bank meeting outcome on 15-Dec-22

• ECB raised rate by 50-bps to 2.50% – In line with market expectation.
• ECB President Lagarde: “We have more ground to cover, we have longer to go and we are in for a long game.”
• Low change of rate hike returning to 75-bps, more rate hike of 50-bps seen.

Global central banks – obsession to bring long term inflation @ 2%.  

Inflation in US @ 7.1% and in UK & Europe inflation is around 8% to 10%.  Where as central banks rate for these regions are much lower.  Central banks is obsessed to bring long term inflation at 2% target rate for long term sustainable growth, for this objective central banks are will and ready to take pain in near term.

Equichain Wealth Advisors: Market View & Opinion

We see the change in market sentiment after the outcome of all three central banks, US Fed, BOE & ECB.  US & European market has rallied around 15% – 20% from June / July 2022 lows on expectation of inflation problem is behind us.

We believe, it is time to get cautious as central banks will remain major force and they are willing and prepared to take pain in near term for larger long-term objective.

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Global market -US Fed, BOE & ECB meeting – Key takeaways.pdf
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Global Market – Repeat of August 2007 -January 2008 Phase ?

Global Market- Repeat of August 2007 to January 2008 phase?

This phase was transitory in nature and change in policy was really quick and we will discuss in details.

1) First step – Acknowledging the problem
2) Second step – Change from hawkish monitory policy to accommodative
3) Third step – Stimulating economy again.

We want to clarify that we are trying to draw some parallel comparison and future events and trends as per our understanding and what has happened during August 2007 to January 2008.   

Policy response by Central banks globally is similar kind that we have seen in past 20 years which is to provide stimulus and bring interest rate down.

Equichain Wealth Advisors: Market View & Opinion

We believe, change in stance is possible in 13 – 14 December 2022 US Fed meeting or it can be expected in subsequent meeting in February 2023.  

We expect market to see healthy rally once there is acknowledgement by US Fed to change its stance.  We would like to clarify that we do not jump to conclusion to that a sharp rally will be followed by fall seen post January 2008 and it needs to be evaluated as future development happens.

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Global market -Repeat of August 2007 to January 2008 phase?.pdf
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Global Market – Powell speech, Jobs data & China’s COVID policy

Global Market- Powell speech, Jobs data & China ‘s zero COVID policy

This week we will discuss strong monthly jobs data, US Fed chair Jerome Powell speech, OPEC+ meeting in focus next week and China likely to change its zero COVID policy to boost economy as protest seen across China.

US Economic data – released on 2-Dec-22

1. Average hourly earnings – Actual @ 0.6% Vs estimate of 0.3%
2. Nonfarm payroll change – Actual @ 263k Vs estimate of 200k
3. Unemployment rate – Actual @ 3.7% Vs estimate of 3.7%

Powell’s ‘Most Important’ Inflation Indicator Is Cooling Down

Prices of services excluding housing and energy services rose 0.3% in October, the smallest increase in three months, and down from a 0.5% jump in September.

China May Signal Policy Shift to Economy from Covid Zero

The 24-member Politburo, the Communist Party’s top decision-making body, usually convenes in early December every year to set broad guidelines for economic policy for the coming year.

Equichain Wealth Advisors: Market View & Opinion

In his speech this week, US Fed chair Jerome Powell has put focus on two major points which we think is clear indication of what can be expected from next US Fed meeting.  Fed rate monitor tool indicate 75% probability of 50-bps rate hike.

1) He sees interest rate stable for a consistent period of time before interest rate decrease.
2) He sees slowdown in rate hike and would like to see impact of recent hike play out.

So, we repeat our view and statement for 4th week straight that we see December 2022 as repeat of August 2007.

Recent development seen this week have turned our view bullish and high probability of repeat of August 2007 – January 2008 phase which witness sharp rally in global assets class with risk-on sentiment.

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Global market -Powell speech, Jobs data & China’s COVID policy.pdf
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Global Market – US Fed balance & US economic data

Global Market- US Balance sheet & Economic data indicates weakness

This week we will focus on US Fed meeting minutes, US Jobless claim and China’s attempt to boost economy which has been hit by zero COVID policy and stringent lockdown.  Recent rally in global market is purely supported by narrative that US Fed will slowdown rate hike and likely to pause see impact of steepest rate hike in recent US history.

US Fed – Balance sheet @ $ 8.62 trillion Vs peak of $ 8.96 trillion.

• US Fed balance sheet was at $ 8.96 trillion in March 2022 which is currently at $ 8.62 trillion.   
• Currently US Fed QT is at $95 billion per month and is expected to continue till Mid 2023.

China Central Bank Boosts Stimulus To Aid Covid-Hit Economy

The People’s Bank of China reduced the reserve requirement ratio for most banks by 25 basis points, it said in a statement Friday. The adjustment takes effect on Dec. 5 and will inject 500 billion yuan ($70 billion) of liquidity into the economy.

Equichain Wealth Advisors: Market View & Opinion

Current global narrative of soft monitory policy due to economic slowdown in US or economic crisis in Europe or economic impact in China due to zero COVID policy, all this indicate the return of easy monitory policy globally.  So, we repeat our view and statement for 3rd week straight that we see December 2022 as repeat of August 2007.

Recent development seen this week have turned our view bullish and high probability of repeat of August 2007 – January 2008 phase which witness sharp rally in global assets class with risk-on sentiment.

Click on the attachment to read the full report:
Global market -US Fed balance sheet & US economic data.pdf
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