In the intricate dance of the financial markets, where every tick of the clock can signal a new opportunity or a looming challenge, staying informed is not just a choice, it’s a necessity. As we stand on the cusp of a new week, the air is thick with anticipation and a myriad of questions. Will the markets surge ahead, or are we on the brink of a pullback? How will the latest economic indicators shape the market narrative? It’s a complex puzzle, and as investors and traders, we’re constantly piecing together information to form a coherent picture of the future.
Picture this: It’s Monday morning, and the markets are just waking up from their weekend slumber. The stage is set for a week that promises to be as unpredictable as it is exciting. The upcoming economic data releases are like the pieces of a grand jigsaw puzzle, each one capable of altering the market’s course. As an investor or trader, your mind races with possibilities and strategies. It’s a high-stakes game where the right insight at the right time can mean the difference between a missed opportunity and a triumph.
This week, the spotlight turns to key economic indicators that will set the tone for market movements. From the latest GDP figures to inflation reports and consumer spending data, each announcement carries the weight to sway market sentiments. It’s like a game of chess, where every move is critical, and the outcome is uncertain. The markets are an arena where fortunes can be made or lost in the blink of an eye, and staying ahead means being perpetually prepared, perpetually inquisitive.
So, why should you, as an investor or a trader, care about this week’s economic events? The answer lies in the interconnected nature of the markets and the economy. Each economic indicator is a thread in the larger tapestry of the financial world. A change in GDP growth or a shift in inflation rates isn’t just a statistic; it’s a signal, a hint at the health and direction of the economy. These indicators are the pulse points that every market participant watches closely, ready to adjust their sails at the slightest wind of change.
As you delve deeper into this blog post, you’ll find more than just data and forecasts. You’ll discover insights that cut through the noise and clutter of the market. Whether you’re a seasoned investor or a newcomer to the trading arena, understanding the implications of these economic indicators is crucial. It’s about making informed decisions, about knowing when to hold back and when to dive in. The information here is your compass in the ever-shifting landscape of the financial markets.
In the following sections, we will dissect the week’s major economic events, day by day. We’ll dive into the nuances of GDP growth, explore the undercurrents of inflation, and decode the signals from consumer spending patterns. Each of these elements plays a vital role in shaping the market narrative for the week. It’s a journey of discovery, where each piece of data adds a layer of understanding, a new perspective on what lies ahead.
So, brace yourself for a week of revelations and insights. The economic indicators lined up for this week are more than just numbers; they are the storytellers of the market, each narrating a unique aspect of the financial saga. As you read on, you’ll gain a clearer understanding of what to expect, how to prepare, and how to navigate the complexities of the market. This is your guide to the week ahead, a roadmap to navigating the twists and turns of the financial markets with confidence and insight.
Remember, in the world of finance, knowledge is more than power; it’s the key to unlocking potential and seizing opportunities. So, let’s embark on this journey together, deciphering the signals, understanding the trends, and preparing for the week ahead in the financial markets. Welcome to a week of exploration, analysis, and strategic foresight. Welcome to the heart of the financial world.
The Hot Zones this Week
Each week there are zones where trading can get wild. I call these the hot zones.
Monday, January 22
The week begins with a focus on the housing market as investors and analysts look at the MBA Mortgage Applications data. This indicator offers insights into the housing market’s health, reflecting consumer willingness to invest in real estate and their confidence in the economy. The trend in mortgage applications can impact financial markets, as changes in demand for home purchases or refinancing can signal shifts in consumer sentiment and future spending patterns.
Tuesday, January 23
No significant economic events are scheduled for this day.
Wednesday, January 24
Midweek, attention turns to a trio of significant releases. Firstly, the GDP report for the fourth quarter is due, providing a comprehensive overview of the economy’s performance. The advance estimate is expected to show a growth rate of 1.5% quarter-over-quarter, indicating a cool-down from the previous quarter’s 4.9% rise. This deceleration is seen as driven by consumer spending, with other sectors like business investment showing more subdued activity.
Simultaneously, the Personal Consumption report will be released, offering a closer look at consumer spending behaviors, a critical driver of the U.S. economy. The GDP Price Index, also scheduled for release, will provide insights into the inflationary pressures within the economy, which have implications for future Federal Reserve policy decisions.
Thursday, January 25
Thursday brings a comprehensive view of economic activity with several key indicators scheduled for release. The Core PCE data, an essential measure of inflation excluding volatile food and energy prices, is expected to show a month-over-month increase of 0.2%. This figure is keenly observed by the Fed in its inflation-targeting mandate and could influence future monetary policy decisions. Additionally, reports on Durable Goods Orders, which indicate the health of the manufacturing sector and consumer confidence, will also be available. Other relevant data include the Core Capital Goods Orders and Shipments, Wholesale Inventories, and the Advance Goods Trade Balance, each offering unique insights into different sectors of the economy.
Friday, January 26
The week concludes with a focus on personal finance metrics. The Personal Income and Spending data will be released, providing a snapshot of the financial health of the average American consumer. These metrics are critical for understanding consumer behavior, which directly impacts economic growth. Accompanying these will be the PCE Prices data, both headline and core, offering further insights into inflationary trends. The week wraps up with the Personal Saving Rate and Pending Home Sales, rounding out a comprehensive view of the U.S. economic landscape.
Macro Market
FED Policy
The Federal Reserve remains cautious about the start of rate cuts, though the pace seems clearer. We anticipate a March rate cut, with Board Governor Waller’s comments reinforcing this view. The Fed’s approach appears methodical, aiming to reduce policy rates early and gradually. This year, expect 25 basis point rate cuts each quarter, amounting to 100 basis points.
Inflation
December’s PCE inflation report indicates both headline and core inflation rising by 0.2% month-over-month. Year-over-year rates for headline and core PCE inflation are projected at 2.6% and 2.9%, respectively, which should bolster the Fed’s confidence in inflation returning to the 2% target.
GDP Growth
The US economy showed signs of cooling at the year-end, with the advance estimate of 4Q US GDP expected at 1.5% quarter-over-quarter, a slowdown from 3Q’s 4.9%. This growth is primarily driven by consumer spending, with nonresidential business fixed investment remaining subdued and a notable drag from inventory accumulation.
Economic Calendar
Briefing.com has a good U.S. economic calendar for the week. Here are the main U.S. releases.
Briefing.com
Last Week’s Numbers
Review Last week’s numbers here.
Earnings
Source I/B/E/S data from Refinitiv
Aggregate Estimates and Revisions
- 23Q4 Y/Y earnings are expected to be 4.5%. Excluding the energy sector, the Y/Y earnings estimate is 8.2%.
- Of the 52 companies in the S&P 500 that have reported earnings to date for 23Q4, 84.6% have reported earnings above analyst estimates. This compares to a long-term average of 66.6% and prior four quarter average of 76.4%.
- During the week of January 22, 61 S&P 500 companies are expected to report quarterly earnings.
Global Spotlight
U.S. Diplomacy in Africa
U.S. Secretary of State Antony Blinken is set to embark on a strategic tour of Africa from January 21-26, visiting Angola, Cabo Verde, Cote d’Ivoire, and Nigeria. The focus of these discussions will center around enhancing U.S.-Africa trade partnerships, addressing climate concerns, and exploring infrastructure and health issues. African representatives are expected to push for augmented trade and infrastructure investments. However, U.S. commitments may remain limited. A key topic on Blinken’s agenda is Niger’s strategic alignment, with the U.S. aiming to strengthen its ties with Niger, amidst concerns over increasing military cooperation between Niger and Russia. This visit comes at a time when Western influence in West Africa, particularly that of France, is waning, making the Sahel region a crucial area for the U.S. to maintain its counterterrorism initiatives.
Strengthening Franco-Indian Ties
French President Emmanuel Macron’s visit to India on January 26, coinciding with Republic Day, signifies the deepening Franco-Indian relationship. This visit follows Indian Prime Minister Narendra Modi’s participation in the Bastille Day celebrations in 2023. High on the agenda is the discussion of India’s potential acquisition of additional French military hardware, including Scorpene-class attack submarines and Rafale fighter jets. This defense cooperation not only serves France’s strategic interests in the Indian Ocean but also aligns with India’s objectives of diversifying its defense procurement and advancing technology transfers. Macron’s visit comes amid a phase of strong political momentum for Modi, further amplified by the inauguration of the Ram Mandir Temple in Ayodhya on January 22, ahead of the 2024 general elections in India.
NATO’s Major Military Exercise
NATO’s Steadfast Defender 2024, the largest military exercise since the Cold War, commences on January 22 and will continue through May. Involving approximately 90,000 troops, numerous naval vessels, and aircraft, the exercise will take place across various NATO member states, including Germany, Poland, the Baltic States, Romania, and Norway. The primary aim is to prepare for and deter a potential Russian offensive against the alliance, showcasing NATO’s rapid deployment capabilities. This exercise, nearly double the size of the 2018 Trident Juncture, is NATO’s first major drill since Russia’s invasion of Ukraine in 2022 and is set to influence discussions at the July 2024 NATO summit in Washington.
U.S.-Houthi Conflict Escalation
The U.S. continues its military engagement with the Yemeni Houthis, following a recent series of strikes against Houthi targets. Despite President Joe Biden’s assertion that the U.S. is not at war with the Houthis, he has committed to continuing these strikes. The Houthis, in response, persist in their efforts to target commercial vessels, escalating tensions and affecting maritime traffic in the Red Sea and Gulf of Aden. Meanwhile, Israeli military operations in the southern Gaza Strip and along the Lebanese border are intensifying, targeting Hamas and Hezbollah leadership. This ongoing conflict poses a risk of escalating into a broader regional confrontation, potentially leading to a second Lebanese-Israeli war.
Stratfor.com
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