January Reset
Fed Hits the Snooze Button
Good news! There is no FOMC meeting this month. That means we have lots of economic data and corporate earnings to look forward to, without monetary policy interference.
Main Macro Events for Jan 1-7:
What to Focus on Jan 3 – 5
PMI Numbers
There’s been a trend throughout 2022 where the manufacturing PMI indexes have been tracking downward. This is due to the global economic slowdown from inflation and central bank tightening. My favourite place to track these metrics is the Trading Economics website. It’s free to use without any signup.
Of the PMI numbers in focus this week, non-manufacturing or services PMI has been the only one showing signs of a potential recovery. Business activity picked up in November, while employment rebounded and price pressures eased. This is good news, but the longer manufacturing PMI stays below 50, the greater the risk of recession. Don’t think the Fed isn’t paying attention.
FOMC Minutes
On Wednesday, investors will get access to the minutes from the last Fed meeting, and since news outlets don’t have access to the publication before the release, market reaction can have a delayed effect. Expectations are that it will stick to the path of raising interest rates, but investors will quickly dissect any new talking points that may arise. You can view the press release and archives here.
Jobs Data Jan 6
Continuing from the discussion above, here’s a great thread that ties together the impact of Nonfarm Payrolls and Manufacturing PMI.
We’ve already seen Manufacturing PMI slip below 50, and NFP is projected to have hit a yearly low in December. This is close to turning negative like Jeff talks about.
Now I’m not in the ‘pivot bros’ camp, but when you see NFP turn negative, it should mean we’re getting close to the end of the Fed tightening era. That doesn’t mean they immediately start paddling backwards and cutting rates though. On Friday we discussed why that’s not likely the case.
Also, I believe the unemployment rate will start to rise soon.
There seems to be a perception that the Fed pivots soon, the economy recovers, and everything returns to normal. I don’t think this is the majority view however, and it seems rather naive. As unemployment rises throughout 2023, possibly on a global basis, it will create greater wealth disparities and economic difficulty for millions of people.
Q4 Earnings Jan 13 Onward
Earnings season kicks off next Friday, starting with the big banks and moving into big tech from the 19th onward. That’s still a little far out, so we’ll pay closer attention as it gets closer. Worth keeping on the radar though, especially if you’re actively trading stocks. Check the earnings calendar here.
Happy New Year!
Jay Charles
Editor in Chief, The Trading Tank.
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