Welcome, fellow finance enthusiasts, market mavens, and geopolitics observers! It’s that time again where we delve into the vast world of finance and global affairs to dissect what’s hot and happening. Get ready to strap in and ride the rollercoaster that is the economic and political landscape in the week of May 22-26, 2023.
As the late, great Mark Twain famously said, “History doesn’t repeat itself, but it often rhymes.” In today’s globalized world, where economies and politics are more intertwined than ever, the truth of this adage is crystal clear. The pulsating heart of Wall Street affects the arteries of global markets, and geopolitical events halfway across the globe can cause ripples felt in the heart of Silicon Valley. Our goal in this weekly update is to connect these dots for you, giving you the insight to understand, and the foresight to anticipate.
Coming up, we’ll break down the key economic indicators set to be released this week—everything from personal income and spending reports to core PCE Prices. These are the thermometers and barometers of our economic climate, the signs and signals that guide traders in their daily dance of buy, sell, hold. Will consumer spending hold firm, or are we set for a fall? Is inflation a phantom menace, or is it knocking on our door? We’ll explore these questions and more.
In the earnings corner, we’ll be casting our eyes over the performance of the titans of the S&P 500. With the first quarter of 2023 nearing its end, these companies’ reports serve as a microcosm of the broader economic picture, the DNA that holds clues to the health of the giant that is the American economy.
And we don’t stop at Wall Street. This week, the geopolitical stage is set with high-stakes performances from Detroit to Moscow to Athens to Beijing. From peace talks in the South Caucasus to the APEC Summit in Detroit, from general elections in Greece to the Congolese President’s crucial visit to China, we’ll provide a front-row seat to these global theatrics. These events often move in the background of our day-to-day lives, but their effects are very much part of the foreground.
So, friends, buckle up and let’s embark on this journey together. The world is our market, and it’s teeming with opportunities. Stay tuned as we turn up the heat and navigate through the hot zones of the week. We invite you to join the conversation, ask questions, share insights, and, above all, be part of this global community that makes sense of a complex world, one week at a time.
The Hot Zones this Week
Another thrilling week of market activity! As we navigate through this week’s hot zones, remember that trading during key economic releases can be akin to sailing through stormy waters—thrilling, yes, but potentially turbulent. So, let’s keep our eyes on the horizon, our hands steady on the helm, and remember, fortune favors the well-prepared.
Each week there are zones where trading can get wild. I call these the hot zones.
The Federal Reserve’s minutes, a record of the central bank’s most recent meeting that holds nuggets of insight for the discerning reader. Much like decoding a secret message, delving into the Fed minutes provides a glimpse into the policymakers’ perspectives on economic conditions, and crucially, their future plans. Will the Fed hold steady, or are we due for a surprise change of course? The implications for interest rates, bond markets, and overall economic stability make the Fed minutes a must-read for traders. So, as we anticipate the release, let’s keep our detective hats on and get ready to read between the lines.
The Personal Consumption Expenditures (PCE) Prices report. Like a trusty compass guiding us through a dense financial forest, this indicator reveals the direction of prices for goods and services bought by consumers. Are we meandering along a steady path, or are we about to encounter a steep uphill climb? The importance of this economic indicator cannot be overstated as it provides a clear picture of inflation trends and allows traders to position themselves effectively. With the PCE prices report for April coming up, we’ll soon be able to answer whether the inflation specter is just a shadow or a tangible threat.
Friday, May 26, 2023:
Personal Income (Apr): Releasing at 08:30 ET, the April Personal Income report will provide insights into individuals’ total earnings from all sources, including wages, salaries, and investments. This data helps assess consumer spending potential.
Personal Spending (Apr): Simultaneously with Personal Income, the April Personal Spending report will be published. This report measures consumer expenditures on goods and services, contributing to a better understanding of consumer behavior.
PCE Prices (Apr): Also releasing at 08:30 ET, the Personal Consumption Expenditures (PCE) Prices report for April will reveal the change in prices for goods and services purchased by individuals. The PCE Prices data is closely monitored as a key inflation indicator by the Federal Reserve.
PCE Prices – Core (Apr): Simultaneously with PCE Prices, the Core PCE Prices report for April will be announced. The Core PCE Prices index excludes volatile food and energy prices, providing a more reliable measure of underlying inflation trends.
Economic Calendar
Briefing.com has a good U.S. economic calendar for the week. Here are the main U.S. releases.
The week of May 22-26, 2023, is packed with important economic releases and events that will influence trading decisions and provide insights into the state of the economy. From manufacturing and services Purchasing Managers’ Index (PMI) data to housing market figures and GDP estimates, investors and analysts will closely monitor these indicators for signs of economic growth and market trends. Here’s a breakdown of the key releases and events scheduled for this week.
Briefing.com
Last Week’s Numbers
Review Last week’s numbers here.
Earnings
Aggregate Estimates and Revisions
- 23Q1 Y/Y earnings are expected to be -0.2%. Excluding the energy sector, the Y/Y earnings estimate is -2.0%.
- Of the 471 companies in the S&P 500 that have reported earnings to date for 23Q1, 76.9% have reported earnings above analyst estimates. This compares to a long-term average of 66.3% and prior four quarter average of 73.5%.
- During the week of May. 22, 15 S&P 500 companies are expected to report quarterly earnings.
Despite ongoing economic challenges, S&P 500 companies are holding strong. The year-over-year earnings for the first quarter of 2023 are projected to decline marginally by 0.2%, or by 2.0% when we exclude the energy sector. However, it’s not all doom and gloom on Wall Street. So far, nearly 77% of the 471 companies in the S&P 500 that have released their 23Q1 earnings have managed to outperform analysts’ predictions. That’s notably above the long-term average of 66.3% and slightly higher than the average of the past four quarters at 73.5%. As we head into the week of May 22, market watchers will be keenly anticipating the earnings reports from another 15 S&P 500 firms. Even in these challenging times, it appears that many of America’s biggest companies are proving resilient.
Source I/B/E/S data from Refinitiv
Global Spotlight
Unraveling the Armenian-Azerbaijani Peace Talks in Moscow
As May 25 draws near, all eyes are trained on the South Caucasus, where a consequential meeting is set to take place. The respective leaders of Armenia and Azerbaijan, Prime Minister Nikol Pashinian and President Ilham Aliyev, are set to take the stage in Moscow, with Russian President Vladimir Putin acting as the mediator. This high-stakes assembly isn’t their first rodeo; previous talks, guided by European Council President Charles Michel, took place just a few weeks prior, on May 14.
Their foreign ministers, in the meantime, were holding their own discussions with the Russian foreign minister, preparing the ground for the upcoming event. The history of such peace negotiations, notably the unsuccessful meeting on October 31, 2022, casts a shadow on expectations. Yet, hope remains resilient in light of the escalating tension due to Azerbaijan’s recent move to establish a checkpoint in the disputed Nagorno-Karabakh region—a move seen as a breach of the 2020 ceasefire by Yerevan.
APEC Summit in Detroit: US-China Relations in Focus
Simultaneously, a world away in Detroit, the Asia-Pacific Economic Cooperation (APEC) is prepping for a trade ministers’ meeting. On the agenda is a crucial tête-à-tête between U.S. Commerce Secretary Gina Raimondo, U.S. Trade Representative Katherine Tai, and Chinese Commerce Minister Wang Wentao. The resurgence of high-level U.S.-China discussions is in jeopardy following the recent U.S.-Taiwan trade agreement, which might prompt Beijing to reconsider its diplomatic approach or even use it as leverage.
Greece’s General Elections: A Turning Point or Status Quo?
In a different corner of the world, Greece braces for its general elections. The incumbent center-right New Democracy party will go head-to-head with the left-wing Syriza party. A win for New Democracy signals the continuity of Greece’s current pro-business approach, which will be welcomed by investors. However, a Syriza victory wouldn’t necessarily result in a dramatic shift, given their softened stance since the early 2010s. The significant difference is that Greece today boasts one of the fastest-growing economies in the EU, a stark contrast to the near ‘Grexit’ scenario less than a decade ago. Regardless of the outcome, the likelihood of a hung Parliament might set the stage for round two in July.
Congolese President’s Beijing Visit: A Glimpse into Sino-Congolese Relations
Finally, President Felix Tshisekedi of the Democratic Republic of Congo (DRC) plans to visit China on May 26, a significant move considering Beijing’s prominent role in the Congolese mining sector. This rendezvous is expected to pave the way for discussions on mining contracts and potential security collaborations. Despite the recently resolved dispute between Congolese state-owned mining company Gecamines and Chinese mining company CMOC, there are details yet to be disclosed, hinting at possible future deliberations. Given Beijing’s substantial investment in the Congolese mining sector and the ongoing conflict in eastern DRC, Tshisekedi’s visit carries considerable weight.
In conclusion, this week promises a flurry of diplomatic engagements and potential shifts in international relations. As these events unfold, we can only wait, watch, and analyze the impact of these high-profile meetings and negotiations.
