Following a recent round of economic data that came in stronger than anticipated and sparked additional hawkish Fed buzz, stocks appear to be closing the week on the defensive.
Anatole Kaletsky, chairman and chief economist of Gavekal Research, refers to investors who are "cautiously pessimistic because they foresee an early U.S. recession" as "pessimistic bulls," and this is not a good scenario for them.
In fact, he continues, they are "wildly positive" because they believe that any economic slowdown will quickly reduce inflation, enabling the Federal Reserve to begin lowering interest rates by the summer. This will then cause bonds and stocks to rebound to levels seen prior to Russia's invasion of Ukraine.
Sadly for this tribe, Kaletsky believes that a U.S. recession in the near future is virtually impossible, and that the economy is more likely to accelerate later in 2023.
Following are his top ten arguments for why he thinks this is the case. Given the length of the list, it is necessary to display portions of Kaletsky's content in bullet points.
In summary, Kaletsky believes there won't be a recession. This suggests that the timing of the Fed's monetary policy easing this year is not the fundamental question. The question is whether the Fed would opt to significantly tighten more during the summer or tolerate permanently higher inflation, both of which would cause a second decline in bond and equities prices, according to Kaletsky.
With S&P 500 futures ES00 down 0.7%, stocks were expected to continue their downward trend from Thursday. Ten-year Treasury rates increased by 3.8 basis points to 3.900% as investors' concerns about inflation staying high persisted. Although gold GC00 lost 1.1%, the dollar index DXY increased by 0.6%.
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The Buzz
On Friday, China Renaissance's stock, HK:1911, fell more than 50% at one point when the business disclosed that Bao Fan, its top executive and primary shareholder, had vanished.
The leading economic indicator index for January, which is coming at 10 a.m., will be closely watched by traders. Two more Fed representatives, Richmond Fed President Tom Barkin and Fed Gov.
Michelle Bowman, in advance of the extended weekend off in recognition of Monday's celebration of Washington's Birthday.
Ahead of Friday's deadline for takeover offers, attention is focused on shares of Manchester United MANU, one of England's most successful football clubs. James Ratcliffe, the British billionaire owner of the petrochemicals business INEOS, as well as organizations from Saudi Arabia and Qatar are thought to be interested.
DoorDash DASH is up 6% in premarket trading on the release of positive results. As the tractor manufacturer posted fiscal first-quarter profit and revenue that vastly exceeded expectations, Deere shares DE are up 3%.
Moderna MRNA is moving in the opposite direction, down 6% following the release of unfavorable flu vaccine test findings.
The region's benchmark natural gas prices have dropped below 50 euros for the first time in 17 months, boosting businesses and consumers across Europe.
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