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In the coming week, U.S. investors would pay a very close attention on the preliminary PMIs readings, the FOMC meeting minutes, revised data on fourth quarter GDP, PCE data, existing home sales as well as personal income and spending.
On Wednesday the Federal Reserve is to publish the minutes of its January meeting, when it slowed the pace of interest rate hikes to 25 basis points after a year of aggressive hiking. The Fed’s meeting minutes on Wednesday will be the spotlight this week as uncertainty over how high interest rates may ultimately rise in the central bank’s battle against inflation has renewed.
The minutes may give investors some insight into the possibility for a larger hike at the upcoming Fed’s March meeting after recent comments from some policymakers indicated support for such a move, despite the Fed hiking a massive 450 basis points over the past 11 months.
The minutes are largely expected to reiterate the central bank’s hawkish stance, which repeatedly indicated more interest rate hikes are likely. This has prompted investors to re-evaluate expectations for how high the Fed will ultimately raise rates with the market widely expecting the federal funds rate to peak above 5.2% in July.
Persistently rising prices have pushed investors to factor in another 75 basis points of rate hikes by July. They have also lowered their bets for the first rate cut with swaps pointing to a 20 basis point reduction by the end of the year, in comparison to a 50 basis point cut seen few weeks ago.
Despite witnessing the most aggressive Fed tightening cycle in decades, U.S. retail sales at all-time highs, unemployment at 43-year lows, nonfarm payrolls ramping up in January and inflation reaccelerating.
The U.S. is to release the personal income and spending data on Friday, which contains the Fed’s preferred inflation gauge – the core personal consumption expenditures index (PCE), which will be closely monitored.
The readings will give more insight into price pressures, while earnings results from number of major retailers will cast some light on how consumers are faring in the current environment of still rising prices. Recent data has shown the decline in the annual rate of inflation has stalled while producer prices rose by the most in seven months in January.
The labour market ballooned in January with the U.S. economy adding an impressive 517K jobs, blowing past economic expectations. While at the same time, a slew of corporate layoff announcements triggered questions about whether there could be a broad slowdown on the horizon.
While recent data suggest the economy might be able to avoid a recession the Fed is far from ending its monetary tightening. After sinking into a bear market territory in 2022, U.S. stocks have rallied in 2023 as signs of easing inflation fuelled bets the Fed could slow the pace of rate hikes. But policy makers have warned that interest rates could rise further as price pressures remain elevated.
The rally from the onset of the year stalled after central bankers reaffirmed, they will continue its fight against inflation as bets on resilient economic growth and a Fed pivot are premature. While the rally has slowed, the higher terminal rates expectations have not reversed it yet either. However, there remains a heightened degree of caution at current levels.
U.S. benchmark index finished the previous week in a mixed fashion and a small trading range below key resistance of 4,277 has formed. The leading RSI indicator completed a top reversal pattern from overbought territory, suggesting the market is vulnerable to a pull back in the short-term.
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Sandeep joined Leverage Shares in September 2020. He leads research on existing and new product lines, asset classes, and strategies, with special emphasis on analysis of recent events and developments.
Sandeep has longstanding experience with financial markets. Starting with a Chicago-based hedge fund as a financial engineer, his career has spanned a variety of domains and organizations over a course of 8 years – from Barclays Capital’s Prime Services Division to (most recently) Nasdaq’s Index Research Team.
Sandeep holds an M.S. in Finance as well as an MBA from Illinois Institute of Technology Chicago.
Violeta joined Leverage Shares in September 2022. She is responsible for conducting technical analysis, macro and equity research, providing valuable insights to help shape investment strategies for clients.
Prior to joining LS, Violeta worked at several high-profile investment firms in Australia, such as Tollhurst and Morgans Financial where she spent the past 12 years of her career.
Violeta is a certified market technician from the Australian Technical Analysts Association and holds a Post Graduate Diploma of Applied Finance and Investment from Kaplan Professional (FINSIA), Australia, where she was a lecturer for a number of years.
Julian joined Leverage Shares in 2018 as part of the company’s premier expansion in Eastern Europe. He is responsible for web content and raising brand awareness.
Julian has been academically involved with economics, psychology, sociology, European politics & linguistics. He has experience in business development and marketing through business ventures of his own.
For Julian, Leverage Shares is an innovator in the field of finance & fintech, and he always looks forward with excitement to share the next big news with investors in the UK & Europe.
Oktay joined Leverage Shares in late 2019. He is responsible for driving business growth by maintaining key relationships and developing sales activity across English-speaking markets.
He joined LS from UniCredit, where he was a corporate relationship manager for multinationals. His previous experience is in corporate finance and fund administration at firms like IBM Bulgaria and DeGiro / FundShare.
Oktay holds a BA in Finance & Accounting and a post-graduate certificate in Entrepreneurship from Babson College. He is also a CFA charterholder.
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