Market Review from Realm Investment Management – week ending 17th February 2023
Concerns rose last week that the US Federal Reserve will stick with large rate hikes. US CPI data for January came in above forecast at 6.4%, US producer prices in January reached a 7-month high and US initial jobless claims came in lower than expected. The yield on the 10-year US Treasury Note rose above 3.9% on Friday, its highest level since November.
Subsequent comments from Fed officials re-inforced the idea that another 0.5% rate hike in March might be back on the table – Loretta Mester, Cleveland Fed President, said there was “compelling economic case” for it. Markets are now pricing in two more 0.25% interest rate hikes from the Fed this year at a minimum.
All thing considered, US stocks held up quite well – ending the week generally flat. Bonds were down and the US Dollar hit a 6-week high.
Investors also have deterioration in US earnings to take into account. According to Factset, 82% of the companies in the S&P 500 have reported results for Q4 2022. Of these, 68% have reported actual EPS above estimates, this being below both the 5-year and 10-year averages.
In the UK, inflation data came in weaker-than-expected with the annual rate falling to 10.1% for January which could ease pressure on the Bank of England. Inflation remains high though and investors can expect further interest rate hikes but maybe not as aggressive as previously expected?
European and UK stocks had a strong week, especially the FTSE100 which, benefitting from recent weakness in the Pound, reached another new high.
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