The Great Pause

Global Recession or Soft Landing?

Preface

Central banks around the world are set to start pausing soon, and we’ll be left to watch how fiscal tightening impacts their respective economies.

This thread by TedTalksMacro takes an excellent dive into the subject as well as the soft landing vs. hard landing conversation.

https://twitter.com/tedtalksmacro/status/1623844293977964544

No matter which camp you’re in, it would be short-sighted to expect 2023 to be a year of tremendous growth and expansion. With this tempered macro backdrop, I’m personally approaching the markets with a day-to-day framework in order to avoid an overarching bias.

So far this approach, along with a close eye on the key economic events is working out well to start off 2023.

Economic Calendar

Highlights

  • Consumer Price Index (CPI) – Tuesday
  • Retail Sales – Wednesday
  • Producer Price Index (PPI) – Thursday
https://tradingeconomics.com/calendar

On Friday, the Bureau of Labor Statistics (BLS) released its annual revisions to the Consumer Price Index for December. Bad news for pivot bros is that they were all to the upside.

  • Headline CPI: previous -0.1%; now +0.1%
  • Core CPI (excluding food & energy), previous +0.3%; now +0.4%
  • Services CPI (~two-thirds of consumer spending): previous +0.6%; now +0.7%

Source

The prints for October and November were also revised upward, taking some of the pep out of Jerome Powell’s ‘disinflation step’ so to speak.

Furthermore, estimates for CPI, Retail Sales, and PPI are all expected to improve on their previous (MoM) prints, which gives investors a hawkish expectation heading into the week.

In the absence of FOMC data and Jerome Powell, it will be interesting to see how the market interprets this information.

If the prints fall below or in line with expectations and stocks shake it off, we are likely going to continue the uptrend. However, it’s worth noting that risk assets reacted negatively to Friday’s inflation revisions. That alone tells us to be careful if CPI and PPI beat expectations this week.

Earnings

Earnings season is winding down, and there are still a few heavy hitters waiting to report. Among them are Coca-Cola, Cisco, Kraft Heinz, and Shopify.

The most anticipated earnings releases for the week are Palantir Technologies #PLTR, Coca-Cola #KO, Shopify #SHOP, Cleveland-Cliffs #CLF, Devon Energy #DVN, Airbnb #ABNB, monday.com #MNDY, Scorpio Tankers #STNG, Roblox #RBLX, and Roku #ROKU.
https://www.earningswhispers.com/calendar

Chart of the Week

Last time Rose saw this kind of volume uptick, it went on an insane run. Easy to see something similar happen again here. Targets in red. If you take the trade, don’t get greedy. Remember to take profits along the way.

If you enjoyed this post, be sure to catch up on the latest in the series here.

Jay Charles

Editor in Chief, The Trading Tank.

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