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WEEKLY ROUND-UP Thru APRIL 22nd 20232: “Calm Before the Storm?”

Hey folks, our thesis continues from the prior week with Bond volatility showing high levels while Equity Volatility is at lows not seen since early January 2022. Something will give and the markets clearly have a lot to worry about; -from forward earnings declines, higher rates and the upcoming debt ceiling debate. Get my take on where we or most likely go to from here in the near term.


US indexes ended the week mixed following a week in which Q1 Earnings seemed to grab the spotlight from a relatively light economic calendar while the VIX fell to its lowest level since late 2021. Three weeks into April saw the S&P move up just 60-BPS which if the trend holds would be the smallest monthly change in May 2022.Volume was also lower as well. Regarding Q1 Earnings most analysts expect them to show an overall decline for the second consecutive quarter, although early reports have generally surprised to the upside.

Weekly jobless claims report brought signs of growing weakness in the labor market, but investors appeared divided on whether to treat this as good news—because it might encourage the Federal Reserve to dial back on rate hikes—or worrisome evidence of a coming recession. Meanwhile, the S&P Global US Composite Purchasing Managers’ Index (PMI) of both services and manufacturing activity rose to its highest level in almost a year to 53.5 which S&P Global analysts attributed to stronger demand, improving supply chains, and strength in new orders. Notably, S&P Global’s manufacturing PMI defied expectations and moved back into expansion territory to 50.4 for the first time since October.

The yield on the benchmark 10-year U.S. Treasury note jumped following the S&P Global data release, reversing earlier declines, and leaving it modestly higher for the week. Currently there is an 87% probability of a FED Rate hike on May 3rd bringing the rate to 5% – 5.25%.

Eurozone business activity appeared to pick up in April, according to PMI data showing activity in both services and manufacturing sectors, rose to a seasonally adjusted 54.4 from 53.7 in March. The minutes of the March meeting of the ECB showed policymakers were split over the decision to raise benchmark interest rates by 50-bps at their next meeting. Meanwhile, annual UK consumer price growth in March slowed by less than expected to 10.1% from 10.4% in February, driven by surging food and drink prices. Also in the UK, the composite PMI rose for a third month running to 53.9 in April from 52.2 in March.

Japan’s core consumer price index (CPI) rose 3.1% year on year in March, in line with expectations and matching February’s reading. After reaching a 41-year high in January, increases in the core CPI have moderated somewhat, largely due to the effect of government subsidies to curb household utility bills. Consumer inflation remains well above the BoJ’s 2% target, however, and along with signs of wage growth gaining momentum, these factors could lead the central bank to consider tweaking its policy of yield curve control (YCC) later this year.

Chinese equities fell as mixed economic data and news that the U.S. may introduce fresh investment curbs against China weighed on sentiment. China’s gross domestic product (GDP) expanded a better-than-expected 4.5% in the first quarter of 2023 from a year earlier, compared with last year’s growth pace of 3.0%. Robust export growth and infrastructure investment, and a rebound in retail spending and property prices, drove the recovery.

Enjoy This Week’s Round-Up;

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