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Hopes of a soft landing for the US economy will intensify over the coming months, allowing equities to rally. However, even if an equilibrium of high employment and low inflation is reached, it will be difficult to keep the economy there. Investors should remain tactically bullish on stocks but look to turn defensive in the second half of 2023.
Last week, 190 thousand initial unemployment claims (IUC) were filed in the US, below expectations they would increase from the prior week’s 205 thousand. On a 4-week moving average basis, initial unemployment claims have now reached an 8-month low,…
The signal from commodity markets warns against the durability of the outperformance of US cyclical equities relative to defensives. In particular, while most commodities have benefitted from a weakening dollar in recent months, the CRB Raw Industrials…
Preliminary estimates indicate that the value of US retail sales fell by a larger-than-expected 1.1% in December following a downwardly revised 1% decrease in November, marking the largest monthly decline since December 2021. Department stores (-6.6% m/m),…
The Fed Beige Book continues to provide a somber outlook for the US economy. It highlighted that “overall economic activity was relatively unchanged since the previous report” and that “contacts generally expected little growth in the months ahead.” In…
According to BCA Research’s US Political Strategy service, the US political and geopolitical context has not yet verifiably improved, and they doubt it will prior to 2024. Any market rally will be capped at an unexpected time over the coming months. The US…
Investors should stay defensive on recession risks until they subside meaningfully.
The gauge of manufacturing activity in the state of New York sank a whopping 21.7 points to -32.9 in January, largely disappointing expectations of a marginal improvement to -8.6. Notably, new orders and shipments dropped by 27.5 and 27.7 points respectively,…
US equity market dynamics are consistent with an improvement in risk-on sentiment in financial markets. US cyclical equities have outperformed defensives by nearly 7% since the beginning of July. However, this market action is inconsistent with the macro…
Speculative-grade US corporate bonds have been rallying alongside other risky financial assets recently. In particular, yields on US junk bonds have declined by roughly 160bps since early October and credit spreads have narrowed. Although continued signs of…