Global stock markets kicked off 2023 in optimistic fashion last week, as a string of data points suggested we could have the ‘goldilocks’ scenario of a soft landing for inflation. More information below on the relevant points, including Friday’s jobs report. However, it is important to tread carefully as we have been here before – most notably in August last year. In any case, this week’s US CPI inflation print will provide some further colour. However, as we will be discussing at tomorrow’s Investment Outlook Webinar, medium term inflation expectations hold the key in whether we see a ‘pivot’ from central banks.

The resilience of company earnings in the face of a slowing economy will also be a key input into both the direction and magnitude of equity returns in the year ahead. With that in mind we look to some of the major US financial's on Friday, where they continue the tradition of kicking off the latest quarterly earnings results. The market will pay close attention to not only the backward-looking results from Q4 2022, but also the forward-looking guidance from company management. Finally, a last call for our Investment Outlook Webinar ‘Pivotal Year Ahead’ which takes place tomorrow at 11am. Registration details available here.


As always, if you wish to discuss anything in this newsletter in further detail, please do get in touch.


Weekly Investment News


The first week of 2023 ended on a positive note with equities showing gains on the back of optimistic indicators in the US and Europe. US equities finished the week up 2.1% in Euro terms and were aided by the positive reaction to the US Jobs Report for December. US jobs growth slowed as the country added 223,000 jobs in December compared with 256,000 in November. This was however, above economists’ expectations of 200,000. Wage growth in December slowed in the US, coming in at 4.6% in comparison to 4.8% in November.


The reading led many market participants to believe the US Federal Reserve’s interest rate rises have begun to effectively combat inflation. Data on Friday, released from the Institute of Supply Management supported this sentiment further, as it showed a contraction in the services sector for the second month in a row. US Treasury yields moved lowered on Friday as investors factored in the likelihood of a slowdown in the US economy. The benchmark US 10 Year Yield shed over 30 basis points last week, finishing the week at 3.56%.


Within Europe, a lower-than-expected inflation reading helped boost equities as positive sentiment around the ECB’s ability to curb inflation strengthened. Eurozone equities finished the week up 4.9% as a result. The flash index for consumer prices showed that inflation had fallen back into single digit territory in December, reading 9.2%, down from 10.1% in November. Some concern remained as most of the decrease was put down to a fall in energy prices which remain unpredictable. Core inflation, which excludes volatile food and energy prices increased to 5.2% from a previous month of 5%. On a more positive note, Croatia formally accepted the Euro as its currency on the 1st of January, becoming the 20th member of the Eurozone.




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